ECONOMICS

Economics is the study of how and why individuals and groups make
decisions about the use and distribution of valuable human ad nonhuman
resources. Economics is divided into macroeconomics, the study of the
behavior of individuals and small groups and microeconomics, the study of the
economics performance of economies as a whole. Economy is a social
institution that organizes a society’s production, distribution and consumption of
goods and services.

To study economics is to study the way how an economy and its

institutions are set up, and how individuals and groups make decisions about
transforming and managing scarce resources to increase human wealth in its
broadest sense. As an institution, the economy operates in a generally
predictable manner. Goods are commodities ranging from necessities to luxury
items. Services are activities that benefit others. Such as the work of priests,
physicians, teachers, couriers, etc.

It is important to distinguish between positive economics and

normative economics. Positive economics is the study of what is, normative
economics is the study of what ought to be. Positive economics seeks to
understand how an economic system actually operates by looking at the way
people make decisions in different types of circumstances. However, a study to
determine what kind of regulation we ought to adopt for a particular economic
problem is a case of normative economics because it involves more than just
knowing how things work, it also involves value judgments.
 ECONOMIC SYSTEMS

Every society’s economic system makes a statement about justice by

determining who is entitled to what. Two general economic models are
capitalism and socialism. No nation anywhere in the world has an economy
that is completely one or the other.
Capitalism is an economic system in which natural resources and the
means of producing goods and services are privately owned. Its three distinctive
features:
1. Private ownership of property. I a capitalist economy,
individuals can own almost anything. The more capitalistic an economy is, the
more private ownership there is of wealth-producing property, such as factories,
real estate and natural resources.
2. Pursuit of personal profit. a capitalist society seeks to create
profit and wealth. The profit motive inspires people to open new businesses,
modernize for greater efficiency or improve their products.
3. Competition and consumer choice. A purely capitalist
economy is a free-market system with no government interference (sometimes
called laissez-faire economy )

Socialism is an economic system in which natural resources and the

means of producing goods and services are collectively owned. Its characteristic
features:
1. Collective ownership of property. A socialist economy limits
rights to private property, especially property used to generate income.
Government controls such property and makes housing and other goods
available to all, not just to the people with most money.
2. Pursuit of collective goals. Individuals are urged to work for
the common goal.
3. Government control of the economy. Socialism favours a
centrally controlled or command economy operated by the government.

Many people think of socialism and communism as the same thing but
they are not. Communism is a hypothetical economic and political system in
which all members of a society are socially equal.
Comparing economic models is difficult because all countries mix socialism
and capitalism to varying degrees. In addition, nations differ in cultural
attitudes toward work, access to natural resources, levels of technological
development and patterns of trade. The distribution of resources within a
population is another important measure of how well an economic system works.
One additional consideration in evaluating socialism and capitalism is the
personal freedom that each system gives its people.