Economics is a social science that studies how individuals, businesses, governments, and societies make choices about the production, distribution, and consumption of goods and services, especially in the context of scarcity- where resources are limited but human wants are unlimited
. At its core, economics examines how people allocate scarce resources to satisfy their needs and desires, and how these decisions affect the overall economy. It involves understanding behavior and interactions of economic agents such as households, firms, and governments, and how these interactions lead to various economic outcomes
. Economics is broadly divided into two main branches:
- Microeconomics: Focuses on individual and business decision-making, analyzing markets, prices, and resource allocation at a smaller scale
- Macroeconomics: Looks at the economy as a whole, studying aggregate phenomena like inflation, unemployment, economic growth, and government policies
Economics also distinguishes between positive economics, which describes "what is," and normative economics, which prescribes "what ought to be"
. The study of economics applies to many fields beyond finance and business, including politics, law, health care, education, and environmental issues, providing tools to analyze and solve complex problems across society
. A classic definition by economist Lionel Robbins describes economics as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses," emphasizing the role of choice and scarcity
. In summary, economics is the study of how people and societies manage limited resources to meet their needs and improve well-being, using analytical methods to understand and predict economic behavior and outcomes.
