Macro Session 3

The Nature of
Economics
Nature of economics
Economics is a social science which

means it studies society and
relationships between people.
Economists analyse many different
aspects of human behaviour and
decision-making within and between
markets, organizations and countries.
Nature of economics
Economics is not really about money,

instead it is about the decisions that we take
in our everyday life – from who to date,
whether to buy a house or which job to
apply for. For every choice we make as
individuals or as a society, there is a cost and
a benefit.
Assumption
Simplifying assumption used in analysis

e.g. assumed behaviour of consumers
and businesses
Ceteris Paribus Assumption
All other factors held constant –

helps to isolate the impact of one
factor e.g. a change in either
price or income on demand
Economic Agents
Consumers, producers, the

government – anyone engaged in
some form of economic activity
Economic Model
Theoretical construct – building a

hypothesis about behaviour that can be
tested, supported, amended, rejected
Economic Problem
Arises from the scarcity of resources

– e.g. limited inputs available to
satisfy unlimited needs and wants
Economics
The study of the allocation of scarce

resources among competing uses in a
way that achieves an inclusive and
sustainable progress in human
development
Opportunity Cost
The value of a choice measured in

terms of the next best alternative
option that is given up (sacrificed)
Social Science
The study of human society,

relationships and behaviours
Value Judgement
A value judgement contains a

normative statement concerning
what ought / should happen in a
given situation
Different methods and tools
used in the study of
economics
Different methods in the study of
economics
 The economy Is considered a science, its main objective is to establish

principles, theories and models of analysis that allow to explain the
economic phenomena that arise both in the domestic and particular, as
in the general and global, studying the dynamics of international financial
markets.
 he objective of this science is to analyze all kinds of phenomena from
three aspects: descriptive economics, economic theory and applied
economics.
 The economy studies the way in which prices of goods and factors of
production are determined, as well as the behavior of financial markets
at the local and global levels, the participation of the State and
governments in the market and international trade.
Inductive method
Also called empirical, it was one of the first methods

proposed by Adam Smith to study economics.
This method consists in establishing propositions,
theories or analysis of a general nature obtained by
the observation and experimentation of isolated
particular cases. The goal is to study the specific to
arrive at a general conclusion.
Deductive hypothetical method
The deductive method is opposed to the
inductive, since it seeks to study a general
proposition to explain the particular. Likewise, the
law of supply and demand can be taken as an
example.
It can be said that the existence of a great supply
of products causes a decrease in the demand of
these, so that lowering prices is a reasonable
action to be taken.
Analytical-synthetic method
It aims to take into account the influence and
incidence of different aspects, such as social and
political, in the case study. Thus, from the
generality, the peculiarities are studied,
decomposing it to the economic fact.
While in making a synthetic judgment, the
objective is to systematically unify the different
heterogeneous and isolated elements that make
up the case study to understand it in its entirety.
Mathematical and statistical method
Starting from the idea that economics is a science and

that it is crucial to verify and check all proposed theories,
it is essential to use mathematics and statistical methods.
These help to verify if the economic phenomenon
conforms well or not to the predictions, theories and
hypotheses previously elaborated.
A clear example of this is econometrics, Branch of the
economy Which is dedicated to the empirical testing of
theories and models with collected economic data.
Behaviorist method
In the case of social science , It is vital to take methods of

sociology or psychology To study how social behavior
influences local and global economies.
Although the economy must analyze the behavior of the
different economic agents that intervene in the markets
and what motivates them to be part of the different
economic cycles, it becomes necessary the study of
disciplines that help to understand the human behavior.
Economic policy
Economic policy refers to the various strategies

that governments and the State put in place to
drive the economy of a country.
Hence the economy must in turn study and know
the fiscal and commercial policies that the
governments put into practice, with the objective
of analyzing the fact or economic phenomenon in
its totality.
Thank You!

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Macro Session 3

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The Nature of

Economics is a social science which

Economics is not really about money,

Simplifying assumption used in analysis

All other factors held constant –

Consumers, producers, the

Theoretical construct – building a

Arises from the scarcity of resources

The study of the allocation of scarce

The value of a choice measured in

The study of human society,

A value judgement contains a

 The economy Is considered a science, its main objective is to establish

Also called empirical, it was one of the first methods

Starting from the idea that economics is a science and

In the case of social science , It is vital to take methods of

Economic policy refers to the various strategies

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