Economics (from the Greek οίκος [oikos], ‘home’ and νομος [nomos], ‘leadership’) is a social science that studies the production and sale, trade and consumption of goods and services. According to the definition given by Lionel Robbins in 1932, the economics is the science that studies the allocation of scarce resources in alternative purposes. As it studies human activity, economics is a social science.
It is said that the economics is positive when trying to objectively predict and explain the consequences of certain choices, given a set of assumptions or comments. The selection of assumptions must be made when constructing a model, as well as observations having to be established are normative choices.
It is said that the economics is normative when recommending a choice at the expense of another choice or is made a subjective assessment of the value.
Economics centered on measurable variables are divided into two main areas: microeconomics dealing with individual agents, such as budgets and business, and macroeconomics taking into account the economics as a whole, demand and aggregate supply, capital and raw materials.
Particular attention is also given to resource allocation, production, dissolution, trade and competition. The economic logic is applied more often for problems of options when missing or have to established the economic value. The main concern in economics focuses on how prices reflect supply and demand, and equations are used to predict the consequences of certain decisions.
Fundamental assumption that is subject to traditional economic theory is the idea of the existence of rational factor trying to maximize the utility. Neoclassical economics is based on this supposition that is used to derive results concerning the functioning of a price system under decentralized market power.
Alongside the formal economy, the informal economy also works.
The economics has experienced several successive phases:
- Ancient economics: it was based on subsistence agriculture.
- Industrial Revolution, which reduced the role of subsistence, changing agriculture in the last three centuries into one based on monoculture and extensive agriculture. Economic growth occurred mainly in the mining, construction and manufacturing.
- In the modern economy of a consumer society an increasingly important role is played by services, finance and technology.
In the modern economy, there are three main areas of activity:
- Primary sector, agriculture, involves the extraction and production of raw materials such as coal, wood, iron etc.
- Secondary sector, industry, involves the transformation of raw materials into goods.
- Tertiary sector, services, provide services to consumers or companies, for example baby-sitting, cinemas etc.
Microeconomics is the set of processes and economic phenomena, relationships and their functional and causal link, which is formed at the level of economic units of families and basic administrative-territorial linker. Mezoeconomics analyzes and investigates the economic life of the sub-branches, branches and economic areas.