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What is Economics?

The Economist's Dictionary of Economics defines economics as

"The study of the production, distribution and consumption of wealth in human society"

Another definition ofthe subject comes from the economist Lionel Robbins, who said in 1935 that

"Economics is a social science that studies human behaviour as a relationship between ends and scarce means which havealternative uses. That is, economics is the study of the trade-offs involved when choosing between alternate sets of decisions."

The purpose of economic activity

Road space throughout the world isbecoming increasingly scarce as the demand for motor transport increases each year – what do you think are some of the best solutions to reducing the problem of congestion on our roads?

It isoften said that the central purpose of economic activity is the production of goods and services to satisfy consumer’s needs and wants i.e. to meet people’s need for consumption both as a means ofsurvival but also to meet their ever-growing demand for an improved lifestyle or standard of living.

The basic economic problem is about scarcity and choice since there are only a limited amount ofresources available to produce the unlimited amount of goods and services we desire.

All societies face the problem of having to decide:

•What goods and services to produce: Does the economy uses itsresources to operate more hospitals or hotels? Do we make iPod Nanos or produce more coffee? Does the National Health Service provide free IVF treatment for thousands of childless couples? Or, do wechoose instead to allocate millions of pounds each year to providing beta-interferon to sufferers of multiple sclerosis?
•How best to produce goods and services: What is the best use of our scarceresources of land labour and capital? Should school playing fields be sold off to provide more land for affordable housing? Or are we contributing to the problem of obesity by selling off these...
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