Economics is a social science that studies how to manage available resources to meet human needs. It also studies the behavior and actions of human beings.
As the planet’s resources are scarce and unfortunately not all of us can dispose of everything, we are forced to manage these assets to obtain what we lack. Economic science involves the decision-making of individuals, organisations, and states to allocate these scarce resources.
The economy also focuses on the behavior of individuals, their interaction with certain events and their effect on their environment (in prices, production, wealth or consumption, among others). It is a social science, because it studies human activity and behavior, which is a highly dynamic subject of study. Human beings are unpredictable. See the economy’s origin.
The ultimate objective of the economy is to improve the living conditions of people and societies. Bear in mind that available resources are limited (there is a shortage), but human needs are unlimited. When a person decides to assign a resource to a specific use, he discards its use for another purpose. This is known as the cost of the opportunity.
The economy is also responsible for the study of all phases related to the production process of goods and services, from the extraction of raw materials to their use by the final consumer, determining how limited resources are allocated.
The main objects of the study of the economy over time were the pricing of goods and productive factors (land, production, capital and technology), the behavior of financial markets, the law of supply and demand, the consequences of State intervention on society, the distribution of income, the economic growth of countries and international trade.
All these factors affect the way resources are allocated, and the economy tries to allocate these resources efficiently. As we can see, the field of economy is as broad as human activity. And that is why, together with being a modern science, many theories of economics cannot be refuted, unlike in pure sciences such as mathematics or physics.
Economists formulate principles that help to understand and solve economic problems. Although there are some economic problems that can be demonstrated, such as the Nash balance or the Arrow paradox.