Definition of Economics
Understand what economics studies and its scope as a social science.
Social Science
Resource Allocation
Decision Making
Economics is the study of how societies allocate scarce resources among unlimited wants and needs. It examines how individuals, businesses, and governments make decisions about production, distribution, and consumption of goods and services.
# Economics Definition Framework
economics_definition = {
"core_definition": "Study of how societies allocate scarce resources",
"key_elements": {
"scarcity": "Limited resources relative to unlimited wants",
"choice": "Need to choose among alternatives",
"trade_offs": "Giving up one thing to get another",
"efficiency": "Making the best use of available resources"
},
"branches": {
"microeconomics": "Individual and firm behavior",
"macroeconomics": "Economy as a whole",
"international": "Global economic interactions",
"behavioral": "Psychology in economic decisions"
},
"fundamental_questions": [
"What to produce?",
"How to produce?",
"For whom to produce?"
]
}
Scarcity and Choice
Explore the fundamental economic problem that drives all economic decisions.
The Scarcity Problem:
• Unlimited human wants and needs
• Limited resources (land, labor, capital)
• Forces individuals and societies to make choices
• Creates the need for economic systems
Types of Resources (Factors of Production):
• Land: Natural resources including raw materials
• Labor: Human effort and skills
• Capital: Tools, machinery, and infrastructure
• Entrepreneurship: Innovation and risk-taking
# Scarcity and Choice Model
scarcity_model = {
"resources": {
"land": {
"examples": ["Natural resources", "Agricultural land", "Mineral deposits"],
"characteristics": ["Fixed supply", "Renewable/Non-renewable"]
},
"labor": {
"examples": ["Physical work", "Mental work", "Skills and education"],
"characteristics": ["Variable quality", "Can be improved"]
},
"capital": {
"examples": ["Machinery", "Buildings", "Technology"],
"characteristics": ["Human-made", "Depreciates over time"]
},
"entrepreneurship": {
"examples": ["Innovation", "Risk-taking", "Business organization"],
"characteristics": ["Combines other resources", "Seeks profit"]
}
},
"choice_implications": {
"trade_offs": "Cannot have everything we want",
"prioritization": "Must rank wants by importance",
"resource_allocation": "Decide how to use limited resources",
"efficiency_need": "Make best use of what we have"
}
}
Opportunity Cost
Learn about the true cost of any choice - what you give up to get something else.
Opportunity Cost Principle:
The opportunity cost of any choice is the value of the next best alternative that must be given up. This applies to individuals, businesses, and governments in all economic decisions.
Examples of Opportunity Cost:
• Student: Time studying vs. working for money
• Business: Investing in new equipment vs. hiring workers
• Government: Spending on defense vs. education
• Society: Current consumption vs. future investment
# Opportunity Cost Calculator
def calculate_opportunity_cost(choice_a, choice_b, selected):
"""Calculate opportunity cost of a decision"""
if selected == 'A':
opportunity_cost = choice_b['value']
benefit_gained = choice_a['value']
else:
opportunity_cost = choice_a['value']
benefit_gained = choice_b['value']
return {
"opportunity_cost": opportunity_cost,
"benefit_gained": benefit_gained,
"net_benefit": benefit_gained - opportunity_cost
}
# Example: Student's time allocation
study_option = {"value