What is Economics? Economics is not a natural science, . it is not concerned with studying the physical world like chemistry, biology. Social sciences are connected with the study of people in society. It is not possible to conduct laboratory experiments, nor is it possible to fully unravel the process of human decisionmaking. “Economics is the study of how we the people engage ourselves in production, distribution and consumption of goods and services in a society.” Normative economics and Positive Economics: Normative economics refers to value judgments, . what “ought” to be the goals, of public policy. Normative statements cannot. | Introduction to Economics ECO401 VU UNIT - 1 Lesson INTRODUCTION TO ECONOMICS What is Economics Economics is not a natural science . it is not concerned with studying the physical world like chemistry biology. Social sciences are connected with the study of people in society. It is not possible to conduct laboratory experiments nor is it possible to fully unravel the process of human decisionmaking. Economics is the study of how we the people engage ourselves in production distribution and consumption of goods and services in a society. Normative economics and Positive Economics Normative economics refers to value judgments . what ought to be the goals of public policy. Normative statements cannot be tested. Positive economics by contrast is the analysis of facts and behavior in an economy or the way things are. Positive statements can be tested. We the people includes firms households and the government. Goods are the things which are produced to be sold. Services involve doing something for the customers but not producing goods. Factors of production Factors of production are inputs into the production process. They are the resources needed to produce goods and services. The factors of production are Land includes the land used for agriculture or industrial purposes as well as natural resources taken from above or below the soil. Capital consists of durable producer goods machines plants etc. that are in turn used for production of other goods. Labor consists of the manpower used in the process of production. Entrepreneurship includes the managerial abilities that a person brings to the organization. Entrepreneurs can be owners or managers of firms. Scarcity does not mean that a good is rare scarcity exists because economic resources are unable to supply all the goods demanded. Rationing is a process by which we limit the supply or amount of some economic factor which is scarcely available. Economic Systems A free market capitalist economy is a system .
