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A very heavy book

My reading for this module this week has been the incredibly weighty tome “economics”, 1994 4^th edition by D. Begg, S. Fischer and R . Dornbusch,  published by McGraw-Hill Book Company in Maidenhead.  It is a very easy to read, entry level book which explains economics in a simplified and an advanced version.  I stuck with the simplified version.

Economics is the study of human behaviour with the central issue facing economists being the almost limitless desire for goods and services when the resources the same goods and services depend upon maybe scarce.   Economics studies how society decides which commodities to produce above another.Economics can be split into two areas, microeconomics and macroeconomics, which represent the differing methodologies at play within the field of economics.  Microeconomics focuses on individual economic transactions about specific commodities whereas macroeconomics studies the interactions in the economy as a whole.

A researcher in the field of microeconomics would concentrate their research into why certain people purchase a certain item and then use the data they have collected to extrapolate a theory of human behaviour which can be applied to the general population.  One critique that can be levelled at microeconomists is their simplicity allows them to ignore the wider picture.   Indirect effects can heavily influence an economic decision. 

Macroeconomists concern themselves with the economy as a whole.  The analysis they undertake tends to focus on GDP, inflation and the labour force.  They are more likely to concern themselves with how government policy is affecting the economy. 

Economies are not the same for each country.  There are three different types of economies, firstly, the command economy.  The command economy is a term used to describe when a central office makes all economic decisions.  Secondly, the free market economy.  This term is used to describe a situation where no one is intervening in the market and individuals pursue their own self interests.  Despite the lack of regulation it is posited that a invisible hand would guide the market.  Lastly, the mixed economy.  A mixed economy is one which is a blend of the command economy and the free market economy.  Mainly the economy is allowed to follow a free market style but government regulation is needed in certain areas.  This is the type of economy which we currently experience in the United Kingdom.

The study of economics can be undertaken for two reasons.  It may explain why things have happened or it may seek to explain what should happen.  The first type of economic study is called positive economics and the second type is called normative economics.  Normative economics is open to subjective value judgments, whereas in positive economics researchers are likely to come to the same conclusions.

Next week I will blog about how to undertake economic analysis and the methodologies involved.