Economics and its role in society.

Тарау 1. Introduction

Сабақ 1.

Introduction into economics.

Economics and its role in society.

Origin of the word “economics”

The word "economics" has its origin in the Greek "oikonomikós" (relating to household management), from "oikos" (house).

Question: What Is Economics?

Answer: There's no one universally accepted answer to the question "What is economics?"

What is Economics? - How Others Define Economics

The Economist's Dictionary of Economics defines economics as "The study of the production, distribution and consumption of wealth in human society."

Economics is the study of the production and consumption of goods and the transfer of wealth to produce and obtain those goods. Economics explains how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways.

The word the economy has an Ancient Greek origin, literally meaning oikos – the house, economy; nomos – the rule, the law, in aggregate – the housekeeping rule. The author of the word "economy" is philosopher Ksenoford.

Now the word the economy has the following meanings:

1. the first it is an economy in a broad sense of this word, i.e. all necessary objects which the person uses for his activity;

2. the second, the economy is an independent science developing laws and allowing to carry out a rational choice among many options of activity because at infinity of human wants resources and opportunities have a limited character.

3. the third, the economy is a system of relationships between people concerning managing.

The economy on the one hand is quantitative science because it uses mathematical methods in the calculations; quantitative categories: output, norm of time, labor productivity, costs of work of production on a unit of production, profit.

Also the economy is verbal science which uses qualitative categories; qualitative categories are efficiency, spiritual interests; quality of a product, charity.

Therefore, the economy is related to such sciences as political science, sociology, medicine, history, philosophy. The economy is a social science.

Any economic event should be considered as caused by many reasons.

The economy depending on scale of the studied phenomena is divided into two: macro and microeconomics.

The microeconomics – studies the economic processes concerning the certain person, the separate family, the separate enterprise or group of companies.

The macroeconomics studies economic events in a section of large branches, regions, the state and as a whole world economy.

The economic indicator characterizes a state of economic objects proceeding in last, present and future. Any economic indicator consists of three elements.

Each economic indicator consists of three elements: indicator name, numerical value, unit of measure. The variety of economic indicators assumes their classification:

1. Absolute measures (volume, quantitative)

2. Relative indicators (qualitative, specific)

3. Standard indicators are indicators established by the higher organizations or are specified in passports of technical means.

4. Reporting statistics. They connect with enterprise work during last period.

5. Scientifically – technical indicators. They concern achievements of progress introduced in production.

6. Average values. They characterize a typical level of the phenomenon, including simple arithmetic-mean and average sizes.

7. Macro and microeconomic indicators.

8. Growth indicators.

The economy has the functional structure:

1. Person, as purpose and means of economy, as producer, consumer, manager.

2. Natural nature, as habitat of the person and source of natural resources.

3. Artificial nature, including, means of production

4. Infrastructure

5. consumer goods

6. Information

The main object of the modern economic theory is a mechanism of the mediated regulation of economy. The modern economy has three features:

1. The modern economy is market;

2. – ineradicable shortcomings, namely – complexity of satisfaction of the general requirements (education, science, support of disabled, ecology), unfair differentiation of the income, monopolism are inherent in market economy. Therefore it is a question of the mechanism of optimum regulation of the market economy directed on maximizing its "pluses" and minimization of "minuses".

3. Social "state" intervention in market economy.

The economic science has difficult structure.

1. The branch organization of a national economy predetermines existence of such economic sciences, as "industrial economy", "transport economics", "environmental management economy", etc.

2. Functional economic sciences include: "accounting"; "finance and credit", "marketing"; "management", etc.

3. There is one more aspect of economic knowledge – historical. It is presented by such

"Economy" grows from "production" which forms a material basis of economy.

Sources of any production are resources.

Resources of production is a set of those natural, social and spiritual powers which can be used in the course of creation of goods, services and other values.

In the economic theory resources can be divided into four groups:

1. the natural – potentially suitable for application in production of natural forces and substances among which we can distinguish "inexhaustible" and "limiting".

2. the material is everything created by the person ("man-made") means of production which are the result of production.

3. the labor – the population at able-bodied age.

4. the financial – money which society is able to allocate for the production organization.

Thus, resources are those natural and social powers which can be involved in production.

Production factors are the economic category designating productions already really involved in process of resources production.

Production is always interacting unity of its factors.

In the economic theory three major factors of production are pointed out:

1. "earth" - as a factor of production has triple value:

а). in a broad sense it means all natural resources used in production;

б). in a number of branches (agrarian, extracting, fish) "earth" is an object of managing when it at the same time acts both "object of the labour", and "means of labour".

в). within all economy "Earth" can act as object of property.

2). "capital" is material and financial resources in system of factors of production;

3). "labour" is that part of society which is directly occupied in the course of production (sometimes use also such term, as "economically – the active population" which covers only able-bodied, taken in production).

"Economics is the study of how individuals and groups make decisions with limited resources as to best satisfy their wants, needs, and desires".

From this definition, we can break down the study of economics into two broad categories - microeconomics and macroeconomics.

What is Microeconomics?

Microeconomics "deals with economics decisions made at a low, or micro, level. How does the change of a price of good influence a family's purchasing decisions? If my wages rise, will I be inclined to work more hours or less hours?"

What is Macroeconomics?

Contrast the above definition to the study of macroeconomics, which deals with the sum total of the decisions made by individuals in a society, such as "how does a change in interest rates influence national savings?"

Themes

Economics involves several recurring themes:

· Trade - buying and selling goods and services

· Models - simplistic situations to understand complex ones

· Happiness - people want to achieve the most happiness

· Choices - choosing the best allocation of resources

· Efficiency - maximizing production and profits

· Scarcity - the premise that people only have so much to work with

· Costs - "there is no free lunch"

· Money - who has money, access to it, how it is used, etc.

· Consumption - the buyers in the market who form the demand

· Production - the sellers in the market who form the supply

· Rationality - people doing things with good and logical reasoning

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