Economics
1. List four key words which you might meet in this text
2. Give your own definition of economics
3. Why is economics sometimes called "the dismal science"
1. Choos, from the list below, a heading for the appropriate section in the text:
-the three fundamental questions each society has to answer
-scarcity: the most important problem in economics
-history of economics as a science
-definition of economics: its ingredients
Economics is an old as human race: it is probably the first art which man acquired. When some cavemen went out to hunt while others remained to defend the fire, or when skins were traded for flint, we had economics.
But,economics as an academic discipline is relatively new: the first major book on economics, Adam Smiths The Wealth of Nations, was published in 1776. Since that time the subject has developed rapidly and there are now many branches of the subject, such as microeconomics, international economics and econometrics as well as many competing schools of thought.
There is an economic aspect to almost any topic we care to mention-education, religion, employment, housing, transport, defence, etc. Economics is a comprehensive theory of how the society works. But, as such, it is difficult to define. The great classical economist Alfred Marshall defined economics as "the study of man in the everyday business of life". This is rather too vague a definiton. Any definition should take account of the guiding idea in economics which is scarcity. scarcity (the limited nature of societys resources).
Virtually everything is scarce; not just diamonds of oil but also bread and water. One only has to look around the world to realise that there are not enough resources to give people all they want. It is not only very poor who feel deprived; even the relatively well-off seem to want more. Thus when we use the word scarcity we mean that all resources are scarce in the sense that there are not enough to fill everyones wants to the point of satiety.
The most important problem in economics is that while the wants of individuals and societies must be satisfied by limited resources, the wants themselves are not limited; rather, they are endless. We are never satisfied with what we have. Individuals are forever lured by more tempting foods, more cleverly engineered computered, more up-to-date fashions. Societies continually desire safer highways, more national security, greater Social Security benefits, or more cancer research.
Scarcity is of course relative to time and fortune. Our generation has many more services and goods to choose from than our parents and grandparents did. The quantity and quality of goods and services may have grown from primitive to modern times, but supply of resources needed to produce them is limited, and human wants are not.
Therefore, each society has no choose how to make the best use of scarce resources. The grat American economist Paul Samuelson said that every economic society has to answer three fundamental questions. "What?", "How?# and "For whom?".
What? - What goods are to be produced with the scarce resources: clothes, food, cars, submarines, television sets, etc.?
How? - Given that we have basic resources of labour, land, etc. how should we combined them to produse the goods and services which we want?
For whom? -Once we have produced goods and services we then have to decided how to distribute them amongst the people in the economy.
Scarcity of resources is at the core of all economic problems. Not being able to all of what they want, individuals and societies must make choices, and a primary role of economists is to anlyses scarcity and the process of choosing.
Thus, people, scarcity and choice are the three vital ingredients in the definition of economics. It is the human science which studies the relationship between scarce resources and the various uses which compete for these resources.