Brief Definition of Economics

What is a brief definition of economics? What are the conditions that give rise to this definition? What are two major reasons for studying economics? What are the distinctions made in the text among the terms “hypotheses,” “theories,” “laws,” and “principles”?

It is the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants. Economic wants are many and diverse. People seek many goods and services to satisfy their wants. Society uses productive resources to produce goods and services that meet these wants. Unfortunately, the economic wants of society exceeds the productive capacity of the economy to produce the goods and services to satisfy those wants.

First, economics is important for a well-informed citizenship. Most of the major issues facing citizens at the municipal, state, or national level involve economics. International relations are also dominated by economic concerns. Political and social leaders often develop policies that have broad economic effects. Economic knowledge is needed if you are to understand the effects of public policy proposals, whether the proposals are related to such issues as taxation, unemployment, inflation, welfare, economic growth, exchange rates, or productivity. Although many public economic decisions are made by elected representatives, the quality of the public decision-making will be affected by the degree of economic understanding among citizens.

Second, the study of economics is beneficial for personal reasons because it helps the individual make more informed decisions. Consumers, workers, and investors usually make wiser choices if they understand the likely economic effects of the choice to be made. Business executives have more insight for making decisions if they understand how the economy works and the likely effects of economic conditions on a business.

Hypotheses are propositions that are tested and used to develop...