True Definition: Economics is the study of the use of scarce resources that have alternative uses.
People have desires that require resources.
Resources are scarce but desires can be infinite, necessitating choices.
Economists study the choices people make regarding resource use.
Economic Questions
Positive Economics: Describes what is.
Example: Why do people use money?
Normative Economics: Argues for what ought to be.
Example: Should people use money?
Rule of Thumb:
No value judgments: Positive economics
Contains value judgments: Normative economics
Branches of Economics
Microeconomics: Studies behavior of individual agents and markets.
Macroeconomics: Studies behavior of the entire economy.
Econometrics
A branch of Statistics tailored for economic data analysis.
Challenges:
Economic data typically comes from real-world scenarios, not controlled experiments.
Faces unique mathematical challenges.
Broader Applications of Economics
Beyond traditional markets, economists study:
Crime, war, family, religion, culture, politics, law, and genetics.
Collaboration:
Economists often co-author studies with professionals in psychology, sociology, criminology, political science, anthropology, biology, neuroscience, and law.