Economics is the social science that analyzes the production, distribution, and consumption of goods and services. Economics explains how people interact within markets to get what they want or accomplish certain goals. An economy exists for two basic reasons, firstly, human wants for goods and services are unlimited and secondly, productive resources with which to produce goods and services are scarce. An economy has to decide how to use its scarce resources to obtain the maximum possible satisfaction of the members of the society.
Economics is studied so you can become a well-informed citizen. Political and social leaders often develop policies that have broad economic effects. International relations are also dominated by economic concerns. Economic knowledge is needed if you are to understand the effects of taxation, unemployment, inflation, welfare, economic growth, exchange rates, or productivity.
We also study economics because it helps the individual make more informed decisions. Consumers, workers, and investors usually make wiser choices if they understand the likely economic effects of the choice to be made. Business executives have more insight for making decisions if they understand how the economy works and the likely effects of economic conditions on a business.
Hypotheses are propositions that are tested and used to develop economic theories. Highly reliable theories are called principles or laws. Theories, principles, and laws are meaningful statements about economic behavior or the economy that can be used to predict the likely outcome from an economic action or event. Models are created when several economic principles are used to explain or describe reality.