As a novice, economics seems to be a dry social science that is laced with diagrams and statistics; a complex branch that deals with rational choices by an individual as well as nations — a branch of study which does not befit isolated study but delving into the depths of other subject areas (such as psychology and world politics).
What is Economics?
Economics Definition: Economics is essentially a study of the usage of resources under specific constraints, all bound with an audacious hope that the subject under scrutiny is a rational entity which seeks to improve its overall well-being.
Two branches within the subject have evolved thus: microeconomics (individual choices) which deals with entities and the interaction between those entities, while macroeconomics (aggregate outcomes) deals with the entire economy as a whole.
A typical college student (or an overburdened husband?) appreciates the lessons of economics in day-to-day life. Semester books and carton of cigarettes (choices) are to be purchased with a limited amount of pocket money (constraints).
The aim of studying economics is to understand the decision process behind allocating the currently available resources, the needs always unlimited but resources being limited.
Adam Smith wrote ‘An inquiry into the Nature and Causes of the Wealth of Nations‘ which as the name suggests, was an attempt at understanding the reasons behind the economic growth (or lack thereof) of a nation.
An interesting backdrop to consider here — the fundamental assumption that we need to make for the whole economic system (as we know it today) to work is that human beings are motivated by pure self-interest and will take decisions that they think will make them ‘better off’ now or sometime in the future.
The economic and political systems of a country are closely inter-linked and jointly determine the well-being of its citizens.