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Federal Democratic Republic of Ethiopia Ministry of Science and Higher Education Module for Introduction to Economics

 

Have you ever heard anything about Economics? Yes!!! It is obvious you heard about

economics and even you talked a lot about economics in your day to day activities. And you

may have questions such as: What are resources? What does efficient allocation mean? What

are human needs? What does demand mean? What is economics? This course will answer

those questions and introduce you to the nature of economics, demand and supply theories,

theories of consumer, production, cost, market structure and fundamental concepts of

macroeconomics at large.

In this chapter you will be introduced to the subject matter of economics and the rationale that

motivates us to study economics.

Chapter objectives

After successful completion of this chapter, you will be able to:

 understand the concept and nature of economics;

 analyze how resources are efficiently used in producing output;

 identify the different methods of economic analysis ;

 distinguish and appreciate the different economic systems;

 understand the basic economic problems and how they can be solved; and

 identify the different decision making units and how they interact with each other

1.1 Definition of economics

Economics is one of the most exciting disciplines in social sciences. The word economy comes

from the Greek phrase ―one who manages a household‖. The science of economics in its

current form is about two hundred years old. Adam Smith – generally known as the father of

economics – brought out his famous book, ―An Inquiry into the Nature and Causes of Wealth

of Nations‖, in the year 1776. Though many other writers expressed important economic ideas

before Adam Smith, economics as a distinct subject started with his book.

There is no universally accepted definition of economics (its definition is controversial). This

is because different economists defined economics from different perspectives:

 

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