Why Do We Study Economy?

Content Introduction 3 What is Economics? 4 Never trust an economist with your job 7 Capitalism: the economy we know 11 Whose Economics? 13 Main tools of economic analysis 15 How markets solve the three economic problems? 16 Conclusion 17 Bibliography 20 Appendices 21

Introduction

From the local to the global, economics is concerned with understanding the way people and societies make decisions and determine outcomes that affect us all whether as consumers, workers, businesses or policymakers. Questions that economists might analyze include:
• Is there a trade-off between the environment and rapidly growing economies?
• Will the internet bring down the music industry?
• Should we ban or tax unhealthy food?
• What caused the global economic crisis and can government action reverse it?
In answering questions like these, economics provides a particular way of thinking about the world that develops your problem-solving and analytical skills. These are skills that are in high demand from employers. We all make economic decisions every day of our lives. Studying economics will enable you to understand the decisions of households, firms and governments based on human behaviour, beliefs, structure, constraints and need. Economics provides you with the knowledge and insight necessary to understand the impact of developments in business, society and the world economy.
Studying economics allows you to go onto work or further study either as an economist or in the field of business. In contrast, studying business alone does not offer you the same opportunities. In other words, studying economics offers you the platform to apply your skills to areas of business, politics, social policy and beyond.

What is Economics?
Economics is a dynamic science. With the development of human civilization this science has evolved to include within its ambit a vast range of topics concerned with human life. Every society on this earth faces three basic facts of human life one, human wants are unlimited two, resources to satisfy these wants are limited and three, resources have alternative uses. Under such a situation a society cannot provide all its members every thing they want. The society has to make a choice of wants to be satisfied in order of priority. Making such a choice is a highly difficult task. Here the science of economics comes to our rescue. Economics teaches us the ways and means to allocate scarce resources among different competing human wants so as to maximize the total satisfaction of our society.
Adam Smith, the famous classical economist defined economics in his book, An enquiry into the nature and causes of the wealth of nations published in 1776 defined economics as a subject which enquires into the nature and causes of the wealth of nations. Here wealth refers to material goods, and economics teaches us various forms of wealth and how more and more of it can be acquired. This definition of Adam Smith was criticized on the ground that wealth accumulation is not an end in itself but only a means to human welfare. Moreover, this definition talks of material goods only; it does not speak about non-material goods like the services of doctors, teachers, administrators, artists and businessmen etc. which play a very important role in increasing human welfare.