Untitled Flashcards Set

Concept map define the term ‘economics’; explain what an economy is; explain the concept of ‘scarcity’ and the inevitability of ‘choice’; define ‘opportunity cost’; differentiate between ‘opportunity cost’ and ‘money cost’; define and illustrate the ‘production possibility frontier’; illustrate efficiency using the ‘production possibility frontier’. The nature of economics unlimited wants production possibility frontier economics and the economy scarcity choice opportunity cost economic ef ciency limited resources versus money cost The definition of economics economics • As you embark on your study of economics, you will hear the comment that there are as many definitions of economics as there are economists. Here are what some of the great thinkers in this field had to say about the subject matter of economics. The famous eighteenth-century economist Adam Smith declared his work to be ‘an inquiry into the nature and causes of the wealth of nations’. J. S. Mill viewed economics as ‘the practical science of the production and distribution of wealth’. Alfred Marshall declared economics to be ‘the study of mankind in the ordinary business of life’. He further stated that economics examines ‘action … connected with the attainment … of the material requisites of well-being’. Modern economists define economics as the study of how man allocates scarce resources, which have alternative uses, to achieve given ends or goals. The following table explains the meaning of economics based on these definitions. 1 1·Basiceconomicconcepts Table 1.1 Definitions of economics Economist Adam Smith 1723–90 J. S. Mill 1806–73 Alfred Marshall 1842–1924 Definition ‘an inquiry into the nature and causes of the wealth of nations’ ‘the practical science of the production and distribution of wealth’ What economics is the creation of wealth from scarce resources the production and distribution of goods and services for consumption and further production ‘action … connected with the attainment … of the material requisites of well-being’ Modern economists the study of how man allocates scarce resources, which have alternative uses, to achieve given goals ITQ1 What makes economics a science? the behaviour and interaction of man to improve his well-being the fact that there is a trade-off, or opportunity cost, involved in production and consumption Economics is a social science. It is a science because it consists of an organised body of knowledge. Also, economists use a set method of inquiry, called ‘the scientific method’, in order to formulate theories and general laws. It is a social science, as it deals with human behaviour in society. Therefore, we can say that economics is a social science that deals with: • the creation of wealth from scarce resources; • the production and distribution of goods and services for consumption; • the behaviour, interaction and well-being of the groups involved in the above activities; • the fact that there is a trade-off involved in production and in consumption