1. Introduction to economics
Economics is a social science devoted to the study of how people and societies get what they need and want. Or, in more formal language, economics is the study of how societies divide and use their resources to produce goods and services and of how those goods and services are then distributed and consumed.
Resources are the basic ingredients that are needed to produce the goods and services that people buy. These ingredients can be physical things such as land and factory equipment, and they can be intangible things such as the intellectual and emotional capacities of people, whose work is necessary for the production of goods and services. Whether a society is rich or poor, large or small, resources are, from the viewpoint of economics, scarce. This means that almost everyone in every country would like more goods and services than can ever be produced. Given a limited supply of resources and an unlimited desire on the part of individual consumers and nations, choices must be made about what goods and services to produce, how to produce them, and for whom.
Economists study these often-difficult choices and their significance. They come up with theories about how such choices are made on both individual and collective levels, and they try to make predictions and find solutions to a wide range of societal problems.
Although thinkers in earlier societies sometimes addressed topics that today concern economists, economics as a field did not emerge until after the Middle Ages (a period that lasted from about 500 to 1500), when capitalism became a firmly established economic system. (In capitalism the economy is controlled by private individuals rather than the government.) Much of economic theory grew out of the ideas of Scottish philosopher Adam Smith, whose book An Inquiry into the Nature and Causes of the Wealth of Nations (1776) is generally considered the founding text of the field of economics. Later, as a result of the writings of English economist John Maynard Keynes in the 1930s, economics came to be subdivided into two main branches, microeconomics and macroeconomics. These branches focus, respectively, on individual and collective economic behaviour. Since Keynes’s time many economists have worked on unifying these two branches of theory.
Economics is a social science devoted to the study of how people and societies get what they need and want. Or, in more formal language, economics is the study of how societies divide and use their resources to produce goods and services and of how those goods and services are then distributed and consumed.
Resources are the basic ingredients that are needed to produce the goods and services that people buy. These ingredients can be physical things such as land and factory equipment, and they can be intangible things such as the intellectual and emotional capacities of people, whose work is necessary for the production of goods and services. Whether a society is rich or poor, large or small, resources are, from the viewpoint of economics, scarce. This means that almost everyone in every country would like more goods and services than can ever be produced. Given a limited supply of resources and an unlimited desire on the part of individual consumers and nations, choices must be made about what goods and services to produce, how to produce them, and for whom.
Economists study these often-difficult choices and their significance. They come up with theories about how such choices are made on both individual and collective levels, and they try to make predictions and find solutions to a wide range of societal problems.
Although thinkers in earlier societies sometimes addressed topics that today concern economists, economics as a field did not emerge until after the Middle Ages (a period that lasted from about 500 to 1500), when capitalism became a firmly established economic system. (In capitalism the economy is controlled by private individuals rather than the government.) Much of economic theory grew out of the ideas of Scottish philosopher Adam Smith, whose book An Inquiry into the Nature and Causes of the Wealth of Nations (1776) is generally considered the founding text of the field of economics. Later, as a result of the writings of English economist John Maynard Keynes in the 1930s, economics came to be subdivided into two main branches, microeconomics and macroeconomics. These branches focus, respectively, on individual and collective economic behaviour. Since Keynes’s time many economists have worked on unifying these two branches of theory.
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