ECONOMICS

The term Social Science refers any subject

that deals with human behavior. Political
Science, Psychology, Ethics, etc. come
within the definition of Social Science. And
now let’s focus and tackle the “Economics.”
Economics is a social science because it
deals with one aspect of human behavior,
how men deal with problems of scarcity.
 What is Economics?
Economics is the study of the
efficient allocation of scarce resources in
order to satisfy unlimited human needs
and wants. Based on the Wikipedia
“Economics” is the social science that
studies the production, distribution, and
consumption of goods and services.
 The word “Economics” came from the
two Greek words, oikos meaning “home”
and nomos meaning “management”.
Samuelson says that Economics is “the
queen of the social sciences”. Because
Economics deals with human beings
living in a society, in a large group of
persons
 with touching interests and problems. It
does not deal with problems of solitary
individuals like Robinson Crusoe. In a
community of people everybody is
influenced by the actions of the others.
 A family faces the challenge of managing
their limited income to satisfy the needs
and wants of its members. The same is true
with society as a whole. Even if we combine
all of the world’s resources, it will never be
enough to cover all humankind’s desire and
needs, which by nature is infinite.
 Economic resources that can be
used to produce goods and services are
called “Factors of Production”. It is
classified into 4 categories: land, labor,
capital, and entrepreneurship. Land
is anything that comes from nature and
which gives life and support to all living
creatures.
Examples:
Clean air
Timber resources
Water
 Labor refers to any human effort exerted during
the production process which includes physical
exertion, application of skills or talent or exercise of
intellectual faculties.
Capital refers to anything that can be used to
create or manufacture goods and services.

Examples:
Goods are buildings
Infrastructures
Machines and other tools used in the
production process
 Entrepreneurship which is not traditionally
considered to be a factor of production, is now
thought to be an indispensable aspect since this
is the ability to organize all the other factors of
production in order to carry out effectively the
production process.
 Economics is classified into 2 scopes:
Microeconomics and Macroeconomics.
Microeconomics is the study of the choices you
made by economic actors such as households,
companies, and individual markets, whereas
Macroeconomics examines the behavior of the
entire economist it also tackles the aggregate or the
total values that describe the whole economy.
 One very important aggregate is the
“Gross Domestic Product” (GDP). It
measures the total output or the
market value of goods and services
that a country produces in one year.
Other macroeconomics indicators
include employment growth, interest
rate, and inflation.
 Adam Smith create a work entitled as “An
Inquiry into the nature and Causes of the Wealth
of Nations (1776)”. It contributed to the theory
of price formation, the relationship of market
outcomes and public interest, the role of state in
the economy, and the sources of economic
growth.
It was also in this book where the
concept of “invisible hand” was
introduced. This concept proposes
that market equilibrium is reached
when buyers and sellers are free to
move on their own without the
intervention of the government.
The desire to maximize gains, both
buyers and sellers, will lead to a
socially optimum result. Other
influential economists includes
Thomas Malthus, known for his work
“ An Essay on the Principle of
Population” (1798), and David
Ricardo’s work Principles of Political
Economy and Taxation (1817).