ANALYTIC ECONOMICS

ANALYTIC ECONOMICS

MEANING OF ECONOMICS

Objectives

  1. Define economics
  2. Explain the scope of economics
  3. Understand why we study economics

Economics is a wide and dynamic subject which makes it extremely difficult to frame a concise and generally acceptable definition.

ALFRED MARSHALL

Defines economics as a study of mankind in ordinary business of life.

ADAM SMITH

He defines economics as an inquiry into nature and causes of wealth of nations

J S MILLS

A practical science of production and distribution of wealth

PROF. SAM ALUKO

A common sense made difficult by people

PROF. LIONEL ROBBINS

Definition of economics, he defines economics as a social science which studies human behaviours as relationship between ends and scarce means which have alternative uses. This is the most generally acceptable definition.

SCOPE OF ECONOMICS

The scope of economics comprises of production, consumption and distribution. These are part of the wide range of the scope of economics.

PRODUCTION

This is the transformation of raw materials into finished goods and services for the satisfaction of man.

DISTRIBUTION

The transfer of goods and services from one place to another

CONSUMPTION

This is what consumer makes use of to their satisfaction.

WHY WE STUDY ECONOMICS

  1. To acquire knowledge about the economy.
  2. To adjust to economic situation
  3. To become expert in the field of economics
  4. To appreciate and apply the principles of economics in our everyday life
  5. To solve economic problems
  6. Helps to render intelligent decision about the economic issues

ECONOMICS AS A SCIENCE, ART OR SOCIAL SUBJECT

Objectives

  1. Proof why economics is a science
  2. Proof why economics is an art
  3. Proof why economics is a social subject

Economics as a course has been recommended for every individual, firm and government or economy to be specific.

Economics as a science

Science is a systematized body of knowledge which is ascertained by observations and experimentation. Economics is therefore a science because it adopts and applies the laws, theories and experimentation e.g. is the mathematical calculations in economics.

Economics is an art

Art is being appreciated because art works are beautiful in the eyes, works like sculpting, stage drama, painting, drawing, and music and so on. The principles of economics, the assumptions, theories and laws are being applied in everyday life; this had made people of the appreciated economics like art.

Economics as a social subject

Economics is a social science because it studies human behaviour; the way man reacts to economic situation is a social science. When I have much I take bike to School but, when I have little I trek to school. That is human behaviour.

BASIC CONCEPTS IN ECONOMICS

These are basic fundamentals on which the study of economics is largely rooted.

WANTS

May be defined as insatiable desire by human beings to own goods and services that give satisfaction, the basic needs of man are food, housing and closing.

SCARCITY

In economics, scarcity refers to limited in supply. Resources available to household, firms, industries and government are limited or few.

EXAMPLE

Tamuno petrol station has 700 litres of fuel in which they have 1000 customers in queue, if they are to buy a litre each, it won’t go round, and here we can say there’s scarcity of fuel.

HOW DO GOVERNMENT SOLVE SCARCITY PROBLEMS

Government can solve this issue by drafting a ‘scale of preference’.

SCALE OF PREFERENCE

Scale of preference is the arrangement of wants according to their order of importance.

IMPORTANCE OF SCALE OF PREFERENCE

  1. Ranking of needs
  2. Financial prudence
  3. Efficient utilization of limited resources
  4. Maximization of satisfaction

CHOICE

Choice can be defined as a systematic selection of one out all items

Kurumenges wants the following

ITEMS                        N

  1. Laptop 100,000
  2. Shirts 7,000
  3. Electric iron 4,000
  4. School fees 120,000
  5. Car 300,000

531,000

She has N250,000, what do you expect her to do?

Scale of preference

Items                                                                    N

  1. School fees 120,000
  2. Shirts 7,000
  3. Electric iron 4,000
  4. Laptop 100,000

231,000

Car is the opportunity cost

IMPORTANCE OF OPPORTUNITY COST

Opportunity cost is very important to the individuals, firms and governments.

Individuals

  1. Wise choice: opportunity cost enables individual to make wise choice between competing wants.
  2. Efficient use of scarce resources: it also assists individuals to make maximum use of scarce resources relative to their unlimited wants.

FIRMS

  1. Rational decision: it assists firm to make rational decisions about production processes.
  2. Techniques of production: it also helps manufacturing industries in deciding the techniques of production, whether adopt capital intensive or labour intensive method of production.

TO GOVERNMENT

  1. Preparation of budget: opportunity cost helps government in the preparation of budget, since it assists in efficient allocation of scarce resources to certain sectors of the economy.
  2. Decision making process: it helps the government in making certain decisions, e.g. the priority areas that many require immediate attention, such as medical, education etc.
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