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1. Introduction
Face-to-face trading interactions on the New York Stock Exchange trading floor. Financial decisions can be one of those many economic choices people make.
Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Greek for oikos (house) and nomos (custom or law), hence “rules of the house (hold).
A definition that captures much of modern economics is that of Lionel Robbins in a 1932 essay: “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” Scarcity means that available resources are insufficient to satisfy all wants and needs. Absent scarcity and alternative uses of available resources, there is no economic problem. The subject thus defined involves the study of choices as they are affected by incentives and resources.
Areas of economics may be divided or classified into various types, including:
• microeconomics and macroeconomics
• positive economics (“what is”) and normative economics (“what ought to be”)
• mainstream economics and heterodox economics
• fields and broader categories within economics.
One of the uses of economics is to explain how economies, as economic systems, work and what the relations are between economic players (agents) in the larger society. Methods of economic analysis have been increasingly applied to fields that involve people (officials included) making choices in a social context, such as crime, education, the family, health, law, politics, religion, social institutions, and war.
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