The Subject Matter of Economics

No one comes to economics as a traveller to an unknown land. Much of our everyday experience is related to economics. Studying economics is directly connected with very important things that involve everyone, such as unemployment, inflation, wages, poverty, taxes, banks, foreign currencies. Economics is the science that deals with the production, distribution and consumption of wealth and with the various related problems of labour, finance, taxation etc. Economics is concerned with the economy or economic system. The economic system determines how the nation's resources of land, labour, machinery and raw materials are allocated and used. The problem of allocating resources is a central theme of economics, because most resources are scarce. The allocation of scarce resources and the distribution of the product of those resources are a major part of the subject matter of economics.

The distribution is determined by the amounts of money paid as wages, rent and other forms of income.

Economists use assumptions to build models, both for explanation and for prediction of economic events. They summarize conclusions on economic questions into economic principles. Western economists believe that all economic questions can be analyzed by examining the decisions of individuals and the outcome of those decisions made by people as consumers or as managers of firms. The Marxist analysis of Western economies is based on the interrelations between social classes – workers and capitalists.