What Is Economics
What is Economics?
Bolanle Gbadebo
Introduction to Microeconomics (ECON210-Q1FF)
Ernest Massie
01/26/2013
WHAT is ECONOMICS
A Professor of Economics Smith, A. (2000) in his book Demystifying economics defines economics as “the study of how individuals and society choose to use limited resources in an effort to satisfy people’s unlimited want” (p11). Also in his book Sowell, T (2004). Basic economics says, “Economics is the study of the use of scarce resources which have alternative uses” (p1). There are five factors of production, which are the resources, use to produce goods and services, they are as follows
Natural resources provided by nature and use to produce goods and services.
Labor is the physical and mental effort people use to produce goods and services.
Physical capital is the stock of equipment, machines, structures, and infrastructure that is used to produce goods and services.
Human capital is the knowledge and skills acquired by a worker through education and experience and used to produce goods and services.
Entrepreneurship is the effort used to coordinate the factors of production-natural resources, labor, physical capital, and human capital- to produce and sell products.
There are three key economic questions, which are: what products do we produce, how do we produce the product, and who consumes the product?
An example of scarcity problem that affects individual consumer is the demand for fresh water is unlimited while the resources for fresh water are limited.