Economics is the social science which studies economic activity: how people make choices to get what they want . It has been called "the study of scarcity and choice" (scarcity is when there is not a lot of something). Economics is about the choices people make. It also studies what affects the production (making things), distribution and consumption (using things) of goods and services in an economy . [ 1 ] Goods are real things that people sell. Services are things that people do. For example, a shoe is a good. A person who makes shoes is doing a service.
Investment and income relate to economics. [ 2 ] The word comes from Ancient Greek , and relates to οἶκος oíkos "house" and νόμος nomos "custom" or "law". [ 3 ] Most of the models used in economics today were made in the 19th century (1800-1899). People took ideas from political economy and added to them because they wanted to use an empirical approach similar to the one used in the natural sciences . [ 4 ]
The subjects (actors) in economic study are households (every person who lives in a house), business companies, the government (the state), and foreign countries. Households offer their " factors of production " to companies. The four factors of production are labor (work), land, capital (things like machines and buildings) and enterprise (people who make decisions about businesses). In exchange for their factors of production, households get income (money) which they use to consume (buy) goods from businesses representing consumption expenditure.
Business companies produce and sell goods and services and buy factors of production from households and from other companies.
The state or public sector includes institutions and organisations. The state takes some of the earnings from the business companies and households, and uses it to pay for "public goods" like street lights or defense systems , to be available for everyone. The last subject is foreign countries. This includes all households, business companies and state institutions, which are not based in one's own country. They demand and supply goods from abroad.
The objects (things acted upon) in economic study are consumer goods, capital goods, and factors of production. Consumer goods are classified as "usage goods" (for example, gasoline or toilet paper), as "purpose goods" (for example, a house or bicycle), and as "services" (for example, the work of a doctor or cleaning lady). Capital goods are goods which are necessary for producing other goods. Examples of these are buildings, equipment, and machines. Factors of production are work, ground, capital, information, and environment .
Economists have had different ideas in the past. For example, Karl Marx lived in a time when workers ' conditions were very bad. John Maynard Keynes lived through the Great Depression of the 1930s. Today, economists can look back and understand why they made their decisions.
The two main types of economics are microeconomics and macroeconomics .
Macroeconomics is about the economy in general. For example, macroeconomists study things that make a country's have more money. They also study things that can make lots of people lose their jobs. Microeconomics is about smaller and more specific things such as how families and household s spend their money and how businesses operate.
There are lots of other branches of economics:
Famous economists in history include:
Famous economists of the 19th and 20th century include Friedrich August von Hayek , Wassily Leontief , Carl Menger , and Léon Walras .