Economics is a social science that studies human
behavior and welfare as a relationship between ends socially
required and scarce means which have alternative uses (Lionell
Robbins, 1935). That is, economics is the study of the trade-offs
involved when choosing between alternate sets of decisions,
considering collective and individual benefits. Understanding
choice by individuals and groups is thus central in economics.
With scarcity, choosing one alternative implies forgoing
another alternative; economists refer to the best alternative
forgone by taking another choice as the opportunity cost.
For instance, learning one skill implies time not spent
learning another. In a market setting, scarcity is often
quantified by price relationships.
Economists believe that incentives and preferences (tastes)
together play an important role in shaping decision making.
Sometimes a preference relation can be represented by a
utility function. Concepts from the Utilitarian school of
philosophy are used as analytical concepts within economics,
though economists appreciate that society may not adopt
The subject is said to be positive when it attempts to
explain the consequences of different choices given a set
of assumptions and normative when it prescribes a certain
route of action.
Aspects receiving particular attention in economics are
resource allocation, production, distribution or trade,
The word economy comes from the Greek oikos- for "house"
and nomos for "laws" or "norms". Originally, the term economics
was used for different contexts: the house, a town, a city
(the "polis" in Greek).
This last use originated the term political economy, while
the term economics was coined around 1870 and popularized
by Alfred Marshall. Note that the word economist predated
After this "change", the term "political economy" has been
used to denote the "classical economy" of the 19th century,
with Adam Smith, David Ricardo and Karl Marx as its main
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