Free Definition of Economics Controversy Essay Sample

A lot of controversy has risen regarding the definition of economics. This is because, some believe it is an art while others claim it is a science; however, in my opinion, it is a social science. This is because it studies and analyzes the human environment. Unlike most sciences, economics is not studied in a laboratory; rather the environment is its laboratory. By using the collected data, primary and secondary, economists are able to assess, understand and predict market trends that are likely to affect the economy. By analyzing the possible production, distribution and consumption patterns of goods and services, governments are able to plan ahead and avoid recessions and market failures in the economies.

How do we study economics?

Economics, just like any other subject is taught in a classroom. Economics entails understanding the basic concept of demand and supply in a market and how to maintain the market equilibrium given various factors. All the variables are represented using equations and graphs and students are taught how to derive various variables regarding the economy from the data. This helps them to understand and predict market trends.

What makes economics a scientific study?

Economics is a science because it makes statements regarding facts collected from the environment. These facts are used to formulate theories that are open to scrutiny and the logic possibility of being proven as false. This is according to Philosopher Karl Popper's definition of a science. This means that, economic methodologies, concepts and paradigms are judged to determine their ability to explain the real world.

Resources are never enough to satisfy the enormous demand in the market. Therefore, producers and consumers both have to make a compromise to ensure they achieve maximum utility from the limited resources available.

Human needs and wants are too many to be satisfied all at once. Therefore, the consumers have to prioritize the most urgent needs and wants and satisfy them first.

Differentiate between need and want

A need is a necessity. Human beings have 3 basic needs, which include food, shelter and clothing. Irrespective of the financial situation, a consumer must meet these needs in order to survive. However, wants are not a necessity for man’s survival. Examples of wants may include cars, television sets and radios. All the above are important, but can not be considered to be necessary. Thus, needs are a must for every person while wants are not.

Define a market

A market is a meeting place where buyers and sellers meet to trade. A market must always operate at equilibrium where demand is equal to the supply. This means that the market must always clear, ceteris paribus. A market is a place where the suppliers and consumers meet to exchange commodities at the market price.

A producer can also be referred to as the manufacturer. He is the supplier in the market. He transforms the raw materials into finished commodities. He then supplies these commodities to the consumer through wholesalers and retailers.

A consumer is simply the customer in the market. A consumer seeks to maximize his utility, and this is achieved by acquiring commodities from the producer within his budget constraint. This means that the set of goods a consumer can afford is determined by his income.

Problems associated with market economies.

Market economies are those markets that are not controlled by a central authority. For example, the government rather they are driven by market forces of demand and supply. Demand must always be equal to supply to maintain equilibrium in the market. This results in stability, in the economy. However, this is not always the case due to arising factors that keep changing over time. These are the market forces. Some of these factors that disrupt market equilibrium include. • Changes in consumer preferences and tastes, which affect the demand of goods and services.

• Inflation and unemployment which determine the money supply in the market, hence the money available to purchase goods and services.

• Strong and volatile capital flows

• Increasing price pressures

 

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