Wednesday, 3 April 2013

Economics Introduction

Economics may to be all stats, equations, charts and heavy handed maths. But in actual fact there is an enormous amount of theory involved. 

In your personal life, for example, you face the problem of having only limited resources with which to fulfil your financial wants and needs as a result, you must make certain choices with your money. You'll probably spend part of your money on rent, save for a house, pay for electricity and food. Then you might use the rest to go to the movies and/or buy a new pair of jeans. Economists are interested in the choices you make, and inquire into why, for instance, you might choose to spend your money on a new car. This can be explained with theories such as game theory. 

Economics is referred to as applicable moral theory, or science a is a study of certain aspects of society. Adam Smith (1723 - 1790), the "father of modern economics" and author of the famous book "An Inquiry into the Nature and Causes of the Wealth of Nations", spawned the discipline of economics by trying to understand why some nations prospered while others lagged behind in poverty. Others after him also explored how a nation's allocation of resources affects its wealth. 

In order to study this, economics makes an assumption that human beings will aim to fulfill their self-interests. It also assumes that individuals are rational in their efforts to fulfill their unlimited wants and needs. 

Economics, therefore, is a social science, and theory, which examines people behaving according to their self-interests. The definition set out at the turn of the twentieth century by Alfred Marshall, author of "The Principles Of Economics" (1890), reflects the complexity underlying economics: "Thus it is on one side the study of wealth; and on the other, and more important side, a part of the study of man."

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