Overview of Economics

• The economy is the sum total of all economic activity.
• Economics is a social science with a wise allocation of scarce resources to produce goods and services, distributed them for consumption, to be able to attain maximum satisfaction.
• Economics is the study of the proper allocation and efficient use of scarce sources to produce commodities for the satisfaction of unlimited needs and wants of man
• Economics is a social science with the wise allocation of scarce resources to produce goods and services, distributed them for consumption, to attain maximum satisfaction.
• Adam Smith, a Scottish economist, is the father of economics and is known for his work "An Inquiry into the Nature and Causes of the Wealth of Nations".
• The principles of economics include the Invisible Hand, Laissez-faire, Division of Labor, Free trade, Free enterprise, Industrial Revolution, Production, Transformation, Distribution, Exchange, Consumption, Scarcity, Choice, and Opportunity cost.
• The Pillar of Economic Policy includes Scarcity, Choice, and Opportunity cost.
• The methodologies of economics include verbal statements, tabular presentations, graphical representations, and mathematical notation.
• Normative economics judges economic outcomes; what out to be, policy economics-courses of action (Law/ legislations).
• Positive economics describes the facts and data in the economy, the description of economic outcomes, without making judgments.
• Economists differentiate between positive economics and normative economics on the basis of whether the users of theory are concerned with causal relationships only or whether they intend some kind of intervention in economic activity to later the course of that activity.
• We would like to be able to predict with some degree of accuracy what is likely to happen to the key variables that affect our well-being and to be able to do something about them if we dislike the predicted consequences.
• The Economic Activity of Man consists of the sectors of the economy: Household, Business firm, Government, and Rest of the World.
• The four factors of production are Land, Labor, Capital, and Entrepreneurship/entrepreneurial ability.
• Economic activities include Production, Transformation, Distribution, Exchange, and Consumption.
• The goals of economics include strengthening economic freedom, promoting economic efficiency, promoting economic stability, and improving economic security.
• The Industrial Revolution took place in 18th century England and introduced machine in factories.
• The Economic Questions include what goods and services to produce, how to produce goods and services, for whom the goods and services to produce, how much to produce, and when and where to produce.
• The goals of economics also include attaining a high level of growth in the economy.
• Growth in the economy is determined by the availability of resources and the insatiable human wants.
• Economic analysis serves as basis of policy formulation.
• Mathematics enables analysts to conceptualize and quantify hypothesis for empirical validation.
• Statistics are used to quantitatively describe economic behavior and serve as basis for hypothesis testing.
• Economic policy consists of intervention or courses of action taken by the government or other private institutions to manipulate the results of economic activity.
• A model is a formal statement of a theory, usually mathematical statement of a presumed relationship between two or more variables.
• Expansion in the resources available for producing goods and services, and improved skills & technology, including managerial and entrepreneurial skills, allow more goods and services to be produced from the given resources.
• The construction of economic theory involves specifying and defining its postulates, data gathering, hypothesis formulation, hypothesis testing, and hypothesis validation.
• Economics being a social science, is a systematic body of knowledge and economists have developed techniques, referred to as the scientific approach or method in data gathering, data presentation and data analyses, that make starting point in understanding economic issues and eventually lead to creating decisions.
• Laws are absolute truths.
• Principles are hypothesis that have withstood the rigors of testing, they are the ones that hold up most of the time in most of the circumstances to which they are relevant.
• Explaining the nature of economic activity enables us to understand the economic environment in which we live, how parts relate to others and what causes what.
• Microeconomics pertains to the study of the behavior of individual units in the economy, including household & business firms, classical economics, and macroeconomics pertains to the economy of the whole, focusing on employment & unemployment, inflation, and monetary & fiscal policies.
• Economic analysis serves as aid in understanding how economy operates because it explains how economic variables are related to one another.
• Economic analysis permits prediction of the results of changes in the economic variables.
• A theory/hypothesis is a statement of the proposed relationship between two or more variables, it is an unproven proposition tentatively accepted to explain certain facts or to provide a basis for further investigation.
• Logic is used to analyze relationships among economic variables from particular to general (inductive) or through deductive (from general to particular).
• Economic analysis is the process of directing economic relationships by examining economic behavior and events, and determining the causal relationships among the data and activities observed.
• Variables are measures that can change from time to time from observation to observation.
• Predicting what will happen to the economy as facts change enables us to anticipate future economic outcomes.
• A hypothesis becomes a principle or theory when empirically validated.