Economics is a social and behavioral science that explains the human nature of decision-making. Economics is an interdisciplinary approach to exploring human behavior in all forms of social, political, ecological, technological and legal environments. Therefore, economics can also be viewed as a dimension of the global environment (See SWOT & PESTLE-Framework) that explains the human decision-making processes and social interactions between members of the society. Every decision and choices made in this world can be viewed as an economic issue that economists deal with in their economic analysis.
How to research about Economics
Find a detailed definition of Economics in the International Encyclopedia of the Social & Behavioral Science (2001, Pages 4158-4159) via Science Direct
Understanding the definition of economics
In order to understand the economics, it is essential to differentiate between decision-making three different perspectives: private consumption and income decisions, public consumption and revenue generation, production and supply of goods and services in an economy. Economics is the science of rational decision-making. Firstly, economists try to explain, how economic subjects make rational decisions, the limitations rational decision-making, human interactions and their outcomes. Secondly, economists try to capture the limits of rational behavior and explain how decision-making takes place under imperfect environment conditions; e. g. information asymmetries, uncertainty, imbalance in power between decision-makers … etc.
The concept of economic subjects is the notion of viewing people in an economy as (1) private households, (2) as firms (or organizations) and as (3) the government (also a form of organization). In general, this means that there are three economic subjects;
- Private Households
- Firms (private and public organizations)
- Government (Public household and organization)
What is an Economy?
An economy is the analytical unit of interest for all economic analysis and includes the people, biosphere and all resources available e.g. a political unit (e.g. Germany, China, France, Ghana) or a unit specified by certain characteristics such as the a continent, a supranational unit, international coalition of nations etc.