What Is The Best Definition Of Economics?

There are so many definitions of what Economics is, but of all these numerous definitions, which is the best definition out there?

The most widely accepted and used definition of Economics is the definition given by Lionel Robbins. Robbins definition of Economics states that “Economics is the science that studies human behavior as a relationship between ends and scarce means, which have alternative uses”.

According to Lionel Robbins’ definition of Economics, a reader or learner quickly realizes that Economics deals mainly with the problem of scarcity and choice. This is the major reason why we have a subject called Economics. In the absence of scarcity of resources, there would be no need for us to study “Economics”.

Lionel Robbins’ definition gives us one of the best ideas what the subject Economics is all about. It is for this reason the definition is the most widely accepted definition of Economics.

Methods That Economists Use In Economic Analysis

What are some of the methods that an economist uses in economic analysis?

There are so many methods that an economist can choose from to use during an economic analysis. Some of these methods or mathematical/statistical tools include the following: algebra, graphs, calculus, averages, percentages, correlation coefficient, diagrams or charts, standard deviation, narrative statements, positive statements, matrices and vectors, etc.

Of all the approaches mentioned above, it is only the narrative statements and the positive statements that are non-mathematical methods that an economist uses in economic analysis.

Why Is Economics A Social Science?

What is the meaning of the statement, “Economics is a social science”?

The statement “Economics is a social science” basically sees Economics as a science that studies an aspect of human behavior through the use of scientific method.

What aspect of human behavior does Economics study? It studies that aspect of the human behavior that deals with how the human being allocates his scarce resources among several wants or needs.

Economics is considered a social science because it employs the use of the scientific method to study an economic problem or phenomena. The scientific method is made up the following steps:

·         Identifying the problem or phenomenon

·         Observation of facts through data gathering

·         Statistically analyzing the data collected to identify a pattern

·         Forming theories or laws with the pattern identified

·         Using the theories or laws to make predictions

·         Testing the theories

Since Economics employs the use of the above “Scientific Method” it is considered a science.

Scientific Methods/Approaches used in Economics

What are some of the common scientific methods/approaches that are used in Economics?

In Economics, scientific methods are one of the most commonly used approaches used to identify and solve problems. Some of the commonly used scientific approaches/methods used in Economics are as follow:

The identification of a problem or phenomenon: Over the years, since time immemorial, the first step in the scientific study of Economics has always been to identify a problem. Here, the economist tries his or her best to identify an economic problem or a phenomenon that can be researched upon. The economist then carries out a major study or research into the problem or phenomenon. The economist hopes to use this step to find possible answers to the problem he or she has identified.

The observation of facts through the collection of data: Another scientific approach used involves the gathering of data pertaining to the problem identified or the phenomenon. Here, the economist would find his target audience and use a study or research instrument such as interviewing to gather relevant information or data for the study. Another study instrument that is often used by researchers is questionnaires.

The analysis of the data collected: The data collected is then analyzed critically by the use of statistical tools such as pie charts, histograms, bar graphs, etc. The purpose of this is so that researchers can discover a particular pattern.

The pattern discovered are used to formulate theories: Having discovered a pattern, then a law or theory is formulated from the pattern. These theories or laws become universally accepted as true under certain circumstances.

Predictions are made based on the theories: Having formulated the theories or laws, economists then use them to predict or forecast future occurrences of certain economic policies that are presently being taken.

Free Goods and Economic Goods

What is the meaning of a free good and an economic good?

In Economics, free goods differ greatly from economic goods in the sense that one is free and unlimited in supply whereas the other is not free and limited in supply.

What is a free good?

A free good is any good that is unlimited in supply or is in great abundance. These goods as the name suggests are normally obtained free. You do not have to pay money or sacrifice any material thing 2in order to obtain free goods. Examples of freed goods include air, sunlight, water, etc.

What are economic goods?

Economic goods are goods that cannot be obtained for free. You have to pay for economic goods before you can get access to them or use them. They are normally scarce goods or limited in supply as compared to free goods. In order to obtain an economic good, you have to lose something – especially money.

 Examples of economic goods include the following: books, cars, computers, houses, clothes, services, mobile phones, furniture, etc.

 

What is the difference between Wants and Needs?

Are our wants and needs the same? If NO, then what is the difference between wants and needs?

Wants

Our wants are the things that we wish or desire to get. We just want to have these things because we want to have them. Our wants are things that we can survive without. We do not really need our wants in order to survive. It is for this reason that our wants are made up of a great deal of luxurious items. While we really don’t need to have these wants in order to survive, they are endless and insatiable. We always crave for these wants. For example, a student might wish for a mobile phone, a computer, an MP3 player, the latest Justin Bieber album, etc. These are all luxury items that the student can do without. They are therefore referred to as wants. Naturally people never get satisfied with their wants.

Needs

What are our needs? Our needs differ greatly from our wants in the sense that they are indispensable or essential to our survival. Some writers define needs as our indispensable or essential wants. Our needs are simply the things that we cannot do without or cannot survive without. We need them in order to survive or achieve a particular goal. For example, water is everybody’s need. Food is also one of everybody’s numerous needs. One of a student’s needs might include a course textbook. The course textbook becomes his need at that particular moment because it is essential or necessary to his passing of the course.

This is the difference between our wants and our needs.

 

Why Is The Study Of Economics Important?

Why should we study Economics as a subject? And what are the advantages or benefits of studying Economics as a subject?

There are so many reasons why the study of Economics is important. Among the numerous reasons include the following:

For Employment Purposes: We study Economics because it can help us to get gainfully employed in future. Students who study Economics while in school greatly increase their chances of getting employment after school because they have something that every employer is looking for.

It Helps Us To Analyze Economic Problems: When we study Economics, we end up getting requisite knowledge and skills that can be used to analyze economic problems and solutions to these problems. A good example of this is that it can help one to properly or efficiently manage scarce resources in their business or elsewhere so that he or she gets the maximum benefit from that scarce resource.

It Helps Reduce Waste: When we study Economics as a subject, we can use that knowledge to minimize any wastage of scarce resources. An entrepreneur who has a background in Economics would rarely waste his scarce resources because he would be able to make sound decisions with regards to the managing of the limited resources that he has.

It Helps In Planning: Economics is a very important subject to be learned when it comes to proper economic planning. Without proper economic planning, businesses cannot thrive and standards of living will surely fall.

It Enables One To Understand Human Behavior: The study of Economics is very important because it can help the graduate to understand human behaviors in certain economic situations. When certain issues such as high inflation rates come up, a police maker with a background in Economics would be able to predict and understand people’s behaviors and can therefore take actions to ease the situation.

The above are the major reasons why the study of Economics is important in schools, colleges and universities.

 

What is a Scale of Preference in Economics?

What is the meaning of a Scale of Preference?

One of the most common economic terms is a Scale of Preference. A scale of preference can be defined as the list of wants or needs that a person writes or comes up with in order of importance.

Here, the person puts his or her most pressing needs or wants at the top of the list and then the less important needs go to the bottom of the list.

An example of a scale of preference:

ITEM	VALUE($)
Computer	500.00
Mobile Phone	100.00
Pair of Shoes	50.00
MP3 Player	50.00
Bag	85.00

 

The table above is an example of a Scale of Preference. From this table, the person’s most important needs or wants have been placed at the top of the table with the less important ones at the bottom. According to this person, his most important need is a computer and then a mobile phone. The bag is his least pressing want so he puts it at the bottom of the table.

Let us assume that the person had only $600.00 to spend, he would be able to purchase the computer and the mobile phone only; the rest of the items that he cannot purchase will therefore be called the opportunity cost. There is absolutely no way the person would purchase anything in the list before purchasing the computer.

This is basically what the economic term Scale of Preference refers to.

What is Opportunity Cost?

What is the meaning of the term opportunity cost in economics?

The economic concept known as opportunity cost refers to the item that a person forgoes from a list of alternatives.

For example, if a person makes a choice from three alternatives, then his opportunity cost are the items or alternatives that he failed to choose.

Another example: John has $500.00 which is enough to buy either a brand new Television set or a brand new computer. John needs both the computer and television, but his money can buy him only one of the two items. He thinks very critically and ends up buying the computer and forgoing the television set. We can therefore say that John’s opportunity cost is the television set that he decided to forego.

This is what the economic term opportunity cost means.

What Is Scarcity and Choice In Economics?

What is the meaning of scarcity and choice in Economics?

Scarcity

In Economics, scarcity can be defined as the instance when a commodity or resource is limited in supply. Whenever this condition prevails then scarcity is said to have occurred.

In Economics, resources are always in short supply with regards to the desire or want for these resources. The resources available to people are always insufficient to satisfy the wants of the people. To an Economist, resources are always limited whereas human wants are always endless or unlimited. This is what economic concept of scarcity means.

Choice

The economic concept of choice simply refers to the act of choosing from two or more alternatives that a person is confronted with. Choice comes as a result of the problem associated with scarcity of resources. Because resources are always scarce, people have to make choices in order to make sure that they are able to use their scarce resources to satisfy their most pressing wants or needs. This is what the economic concept of choice means.