An Introduction to Economics and the Economy group of people must solve three basic problem of daily living: What goods and services should be produced? How should those goods and services be produced? For whom should the goods and services be produces? Economics is the study of how society decides what gets produced, how, and for whom.

The definition emphasizes the role of society and in so doing places economics among the social science – the sciences that study and explain human behavior. The subject matter of economics is the part of human behavior that relates to the production, exchange, and use of goods and services.

The central economic problem for society is how to reconcile the conflict between people’s virtually unlimited needs and desires for goods and services (land, labor, and machines) required to produce those goods and services. In answering the questions What? How? and For whom? Economics explains scarce resources are allocated among competing demands.

Three Economics Issues

Trying to understand what economics is about from definitions is like trying to learn to ride a bicycle by reading an introduction book. It’s much better to get going. In this section we discuss three specific economic issues which show how society deals with the allocation of scarce resources among competing demands. In each case, we see how the questions of what? How? and for whom? appear.

Fischer, Stanley and Dornbusch, Rudiger. 1983. The Macro Economics. McGraw-Hill, Inc. USA

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