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Economic Models

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  Economists often study politically charged issues, but they try to address these issues with a scientist’s objectivity. Like any science, economics has its own set of tools — terminology, data, and a way of thinking. The best way to become familiar with these tools is to practice using them. By using economic models, we can understand economic phenomenon. Model Building Teachers of biology teach basic anatomy with plastic replicas of the human body. These models have all the major organs—the heart, the liver, the kidneys, and so on—which allow teachers to show their students very simply how the important parts of the body fit together. Although these plastic models are artificial, show many details, and even omit many other details about the human body, no one would mistake one of them for a real person. Economists also use models to understand the world, but unlike plastic manikins; an economist’s model is more likely to be made of symbols, diagrams and equations. Economis...
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Microeconomics Vs Macroeconomics

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  Microeconomics and macroeconomics are broad branches of economics. Microeconomics is the study of how individuals, groups of individuals, and firms make decisions and how these decision-makers interact in the marketplaces. It looks at how these single units function individually. A central principle of microeconomics is that households and firms optimize (maximize) utility and profits respectively. Economy-wide events arise from the interaction of many individuals, households and firms, so microeconomics and macroeconomics are linked. Because aggregate variables are the sum of the variables describing many individual decisions, macroeconomic theory based on a microeconomic foundation. But although microeconomic decisions cause macroeconomic phenomena, macroeconomic models do not necessarily focus on the optimizing behavior of households and firms; they sometimes leave that behavior in the background. Macroeconomics studies the economy as a whole. To study the economy as a w...
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Meaning of economics, how it is an art and a science

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Meaning of economics The term “Economics” came from the Greek word “Oikonomos”. The word “oikonomos” can be decomposed into two parts, “oiko-” (means “house”) and “-nomos” (means “rule” or “law”). Therefore, “Oikonomos” means rules of household management (house manager). The oikos (household) served as the fundamental unit for organizing social, political, and economic life. Households have limited resources with unlimited needs, so, they have the problem of how to manage those scarce resources to satisfy their unlimited needs. Scarcity of resources and unlimitedness of needs turned out economics. Therefore, Economics is a social science which study how to use limited resources to satisfy our unlimited needs. Economics as an art and as a science Economics is both a science and an art. How can we answer these questions “What do we know?” and “How do we know that what we know is right?” Economics is science in terms of its accumulation of knowledge base, descriptive knowledg...
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