HSC Economics 1 Suggestion Question 2020-6

HSC Economics 1 Suggestion Question 2020-6. A focus of the subject is how economic agents behave or interact and how economies work. Consistent with this, a primary textbook distinction is between microeconomics and macroeconomics. Microeconomics examines the behavior of basic elements in the economy, including individual agents (such as households and firms or as buyers and sellers) and markets, and their interactions. Macroeconomics analyzes the entire economy and issues affecting it, including unemployment, inflation, economic growth, and monetary and fiscal policy.

HSC Economics 1 Suggestion Question 2020-6

Model Question No. 6

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, “management of a household, administration”) from οἶκος (Oikos, “house”) + νόμος (nomos, “custom” or “law”), hence “rules of the house(hold)”. Political economy was the earlier name for the subject, but economists in the late 19th century suggested: “economics” as a shorter term for “economic science” that also avoided a narrow political-interest connotation and as similar in form to “mathematics”, “ethics”, and so forth.

The mainstream economic theory relies upon a priori quantitative economic models, which employ a variety of concepts. Theory typically proceeds with an assumption of ceteris paribus, which means holding constant explanatory variables other than the one under consideration. When creating theories, the objective is to find ones which are at least as simple in information requirements, more precise in predictions, and more fruitful in generating additional research than prior theories.

While neoclassical economic theory constitutes both the dominant or orthodox theoretical as well as methodological framework, economic theory can also take the form of other schools of thought such as in heterodox economic theories.

In microeconomics, principal concepts include supply and demand, marginalism, rational choice theory, opportunity cost, budget constraints, utility, and the theory of the firm. Early macroeconomic models focused on modeling the relationships between aggregate variables, but as the relationships appeared to change over time macroeconomists, including new Keynesians, reformulated their models in micro foundations.

The aforementioned microeconomic concepts play a major part in macroeconomic models – for instance, in monetary theory, the quantity theory of money predicts that increases in the growth rate of the money supply increase inflation, and inflation is assumed to be influenced by rational expectations.

In development economics, slower growth in developed nations has been sometimes predicted because of the declining marginal returns of investment and capital, and this has been observed in the Four Asian Tigers. Sometimes an economic hypothesis is only qualitative, not quantitative.

Expositions of economic reasoning often use two-dimensional graphs to illustrate theoretical relationships. At a higher level of generality, Paul Samuelson’s treatise Foundations of Economic Analysis (1947) used mathematical methods beyond graphs to represent the theory, particularly as to maximizing behavioral relations of agents reaching equilibrium. The book focused on examining the class of statements called operationally meaningful theorems in economics, which are theorems that can conceivably be refuted by empirical data.

Economic writings date from earlier Mesopotamian, Greek, Roman, Indian subcontinent, Chinese, Persian, and Arab civilizations. Economic precepts occur throughout the writings of the Boeotian poet Hesiod and several economic historians have described Hesiod himself as the “first economist”.

Other notable writers from Antiquity through to the Renaissance include Aristotle, Xenophon, Chanakya (also known as Kautilya), Qin Shi Huang, Thomas Aquinas, and Ibn Khaldun. Joseph Schumpeter described Aquinas as “coming nearer than any other group to being the “founders’ of scientific economics” as to monetary, interest, and value theory within a natural-law perspective.

Two groups later called “mercantilists” and “physiocrats”, more directly influenced the subsequent development of the subject. Both groups were associated with the rise of economic nationalism and modern capitalism in Europe. Mercantilism was an economic doctrine that flourished from the 16th to 18th century in prolific pamphlet literature, whether of merchants or statesmen.

It held that a nation’s wealth depended on its accomeulation of gold and silver. Nations without access to mines could obtain gold and silver from trade only by selling goods abroad and restricting imports other than of gold and silver. The doctrine called for importing cheap raw materials to be used in manufacturing goods, which could be exported, and for the state, regulation to impose protective tariffs on foreign manufactured goods and prohibit manufacturing in the colonies.

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