Economics is a social science that studies individuals
and organizations engaged in the production, distribution,
and consumption of goods and services.
The goal is to predict economic occurrences and to
develop policies that might prevent or correct such
problems as unemployment, inflation, or waste in the
economy.
Economics is subdivided into macroeconomics
and microeconomics. Macroeconomics studies aggregate
output, employment, and the general price level. Microeconom-ics studies the economic behavior of individual decision makers such as
consumers, resource owners, and business firms.
The discipline of economics has developed principles, theories, and
models that isolate the most important determinants of economic events.
In constructing a model, economists make assumptions to eliminate unnecessary
detail to reduce the complexity of economic behavior. Once
modeled, economic behavior may be presented as a relationship between
dependent and independent variables. The behavior being explained is
the dependent variable; the economic events explaining that behavior are
the independent variables. The dependent variable may be presented as
depending upon one independent variable, with the influence of the other
independent variables held constant (the ceteris paribus assumption).
An economic model will also specify whether the dependent and independent
variables are positively or negatively related, i.e., moving in the
same or opposite directions.