Economics

What is the theory?

The theory expresses a causal relationship between cause and effect. It attempts to explain “why”.
It consists of a set of definitions starting clearly what we mean by various terms in which the world
behaves.

What is economics theory ?

Economics is a science which like any other science. It depends on organises body of theoretical
knowledge . The theoretical knowledge based on facts. And the facts based on verified hypotheses
are raised to the status of a theory .

As a put by Boulding ,”Theories without facts may be barren , but facts without theories
meaningless.”

Nature of Economics theory:

Economics theory involves generalization which are statements of general tendencies or

uniformities of relationship among various elements of economics phenomena . A generalization is
a establishment of a general truth on the basic of particular experiences . Economics is the scientific
study of the ownership ,use and exchange of scarce recourses .

Often shortened to the science of scarcity Economics is regarded as a social science because it uses
scientific methods to builds theories that can help explain the behaviours of individuals, group and
organizations. This is true for economics as witnessed by the development of many different stands
of many investigation including micro and macro economics ,pure and applied economics and
industrial and financial economics .

What links them all in the attempt to understand how and why exchanges takes place, and how
exchanges creates benefits and cost for the participants .Why scarce resources our exchange?

The role of government compensating for the limitations of markets in achieving mutually
beneficial exchange ?

In this situation , great economist P.A. Samuelson exposed some fundamental problems.

They are –
1) What to produce ?
2) How to produce?
3) For when to produce?
4) Are the recourses economically used?