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what does economics study?

what do you think of when you hear the word

economics? money, certainly, and perhaps

more complicated things like business, inflation

and unemployment. the science of economics

studies all of these, but many more things as well.

perhaps you think that economics is all about

the decisions that governments and business

managers take. in fact, economists study the

decisions that we all take every day.

very simply, economics studies the way people

deal with a fact of life: resources are limited, but

our demand for them certainly is not. resources

may be material things such as food, housing and

heating. there are some resources, though, that

we cannot touch. time, space and convenience,

for example, are also resources. think of a day.

there are only 24 hours in one, and we have to

choose the best way to spend them. our everyday

lives are full of decisions like these. every decision

we make is a trade-off. if you spend more time

working, you make more money. however, you

will have less time to relax. economists study the

trade-offs people make. they study the reasons

for their decisions. they look at the effects those

decisions have on our lives and our society.

what are

microeconomics and

macroeconomics?

economists talk about microeconomics and

macroeconomics. microeconomics deals with

people, like you and me, and private businesses.

it looks at the economic decisions people make

every day. it examines how families manage

their household budgets. microeconomics also

deals with companies - small or large - and

how they run their business. macroeconomics,

on the other hand, looks at the economy of a

country - and of the whole world. any economist

will tell you, though, that microeconomics and

macroeconomics are closely related. all of our

daily microeconomic decisions have an effect on

the wider world around us.

another way to look at the science of economics

is to ask, ‘what’s it good for? ’ economists

don’t all agree on the answer to this question.

some practise positive economics. they study

economic data and try to explain the behaviour

of the economy. they also try to guess economic

changes before they happen. others practise

normative economics. they suggest how to

improve the economy. positive economists say,

‘this is how it is’. normative economists say,

‘we should … ’.

so what do economists do? mainly, they do three

things: collect data, create economic models

and formulate theories. data collection can

include facts and figures about almost anything,

from birth rates to coffee production. economic

models show relationships between these different

data. for example, the relationship between the

money people earn and unemployment. from

this information, economists try to make theories

which explain why the economy works the way

it does.

sofianastusenko    2   18.10.2019 15:13    7