Introduction to Economics

Definition of Economics

• Economics is the study of the use of scarce resources that have alternative uses.
• Misconceptions:
  • Economics is not merely the study of money or accounting.
  • It is also not inherently a hard subject to study.

Fundamental Concepts

• People have needs and desires that require resources to fulfill.
• Resources are limited (scarce), while desires can be infinite.
• Choices must be made regarding the allocation of scarce resources.

Categories of Economic Questions

• Economic questions are classified into two categories:
  1. Positive Economics:
     • Describes what is.
     • Example: "Why do people use money?"
  2. Normative Economics:
     • Argues for what ought to be.
     • Example: "Should people use money?"
• Rule of thumb:
  • Positive economics has no value judgments.
  • Normative economics includes value judgments.

Branches of Economics

• Microeconomics:
  • Studies the behavior of individual agents and markets.
• Macroeconomics:
  • Studies the behavior of the entire economy.

Econometrics

• A specialized branch of statistics used by economists.
• Focuses on analyzing economic data from the real world rather than controlled experiments.
• Faces unique mathematical challenges.

Interdisciplinary Nature of Economics

• Economists study various aspects of life beyond traditional markets, including:
  • Crime
  • War
  • Family
  • Religion
  • Culture
  • Politics
  • Law
  • Genetics
• Collaboration with other disciplines (psychologists, sociologists, biologists, etc.) is common.