Economics 4 Term paper
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Economics is the social science that studies the production, distribution, exchange, and consumption of goods and services. The study of economics focuses on how individuals, corporations, and societies choose to use the scarce resources provided by nature and previous generations.
Scarce resources provided by nature that societies choose to use include oil, land, water, and time. These elements are important to the economy because oil, land, and water provide money for the market. The more they are used, the more scarce they become, the higher the demand for them, the higher the prices go. Time plays an important role in this cycle because there is not a lot of time before resources run out. Time is important because people need to use it in the best way that they can. For example, if a machine makes one thousand products in one day, and there is an order for one thousand and two hundred, what does the owner of the company do? He can either stay late to make the extra two hundred, but he would have to pay the workers overtime which is time and a half and that would cost him money. His other option would be to wait until the next day, but then he might loose business because the order was for one thousand and two hundred for that day. Scarce resources provided by previous generations that societies choose to use are people, labor, banking, machines, roads, bridges, and transportation. These resources are important to the economy because they are what keeps the market economy going at a steady pace. The roads, bridges, and transportation provide a way for the people to get to their destination, while banking and labor keep the people going to their jobs.
Economists study the ways people earn a living and provide for their material needs. They study how people behave as a result of a change in price, income, or other variables. Many are employed in business and industry but there are many different areas of economics that economists specialize in. Industrial economists study many different forms of business organization. They study the production costs, markets, and investment problems. Agricultural economists study farm management and crop production. Labor economists study wages and hours of labor, labor unions, and government labor polices. Other fields of economics include taxes, banking, international trade, economic theory, and comparative economic systems. Some economists specialize in inflation, depression, employment, unemployment, and tariff polices. Others specialize in investments, the utilization of manpower, business cycles, and the development of natural resources. Societies are interested in economist's conclusions because they keep us up to date with how the market economy is holding itself up. They give us information on how our wages will be affected, how prices on goods will alter, and how demand on products will go up because of certain decisions we make.
Macroeconomics deals with the big picture-with the macroaggregates of income, employment, and price levels. Although microeconomics still deals with important details because the big picture is made up of its parts. Billions of dollars would be meaningless if they did not correspond to the thousand and one useful goods and services that people really need and want.
Microeconomics is the study of economic behavior of individual decision makers who are making choices about what to buy and what to sell, how much to work and how much to play, how much to borrow and how much to save. Microeconomics focuses on what factors affect individual economic choices and how changes in these factors alter these individual economic choices.
Macroeconomics is the sum of microeconomics. Macroeconomics is the study of the economy's performance as a whole. Macroeconomics considers the combined effect of individual choices on the overall performance of the economy as reflected by such measures as the nation's price level, total production, and level of employment. (1) Macroeconomics puts all the little pieces of the economy together and focuses on the big picture. Macroeconomics is the study of the sum total of economic activity that focuses on the issues of the economy such as inflation, growth, and unemployment. Macroeconomics is the branch of economics that deals with a country's overall economy including the country's input and output. It also includes the GNP (Gross National Product) which is the total value of goods and services produced in an economy in a certain period of time, usually a year.
Economics is a social science that predicts actions based on certain changes. A positive economic statement is purely based on facts and makes no value judgement. The statement does not have to be true, but it must have references available for verification. Positive economics can be referred to as "What is, what was, and what will probably be" economics. Positive economics is based on sound economic theory, probability, and statistical methods as it studies and determines the probable outcomes from an increase or decrease in taxes. It provides only the probable outcomes of alternative decisions. It is assumed that an educated society will make the most rational choices for themselves, and exercise those choices in the marketplace. Positive economics attempts to understand behavior and the operation of economic systems without making judgements about whether the outcomes are good or bad. It strives to describe what exists and how it works. Positive economics is an approach to economics that seeks to understand behavior and the operation of systems without making judgements. It describes what exists and how it works.
In contrast, normative economics looks at the outcomes of economic behavior and asks if they are good or bad and whether they can be made better. Normative economics involves judgements and prescriptions for courses of action. Normative economics is a method of economics that states "what should be" instead of what is. Normative economics is subjective, and values judgement and opinions that cannot be tested or proven. Normative decisions are stated during political events. The candidate for a particular party may make a speech stating, "We ought to get the homeless put into shelters", "People should make an effort to stop violence", and "We should lower taxes". Normative economics focuses on the total outcomes of economic activity and asks if they need improvement and it requires the judgements and prescriptions for courses of action. A normative economic statement represents someone's opinion, which can not be proven or disproven because there are no facts. Positive statements are concerned with what is, while normative statements are concerned with what, in someone's opinion, should be. (2)
Positive economics is often divided into descriptive economics and economic theory. Descriptive economics is simply the compilation of data that describe phenomena and facts. Where does all of this data come from? The Census Bureau produces an enormous amount of raw data every year, as do the Bureau of Labor Statistics, the Bureau of Economic Analysis, and non-government agencies such as the University of Michigan Survey Research Center. One important study now published annually is the Survey of Consumer Expenditure, which asks individual households to keep careful records of all their expenditures over a long period of time.
Economic theory attempts to generalize about data and interpret them. An economic theory is a statement or set of related statements about cause and effect, action and reaction. An example of this is a theory that Alfred Marshall stated in 1890 about the law of demand: When the price of a product rises, people tend to buy less of it; when the price of a product falls, they tend to buy more.
In economics and politics, Laissez-faire is a doctrine holding that an economic system functions best when there is no interference by the government. The capital follows its most lucrative course. It is based on the belief that the natural economic order tends, when undisturbed by artificial stimulus or regulation, to secure the maximum well being for the individual and therefore the community. The principles of laissez-faire were formulated by the French physiocrats in the 18th century in opposition of mercantilism. In time, laissez-faire came to be perceived as promoting monopoly rather than competition and as contributing to boom-and-bust economic cycles, and by the mid non-interference in economic affairs had generally been discarded. Nevertheless, laissez-faire, with its emphasis shifted from the value of...
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