Q.
a) Define economics and clarify why we should study economics? (5 marks)
b) Explain the advantages and disadvantages of the following economic systems:-
i) Central command system. (5 marks)
ii) Free market system. (5 marks)
iii) Regulated or mixed market system. (5 marks)
(20 marks, 2013 Q1)
A.
a) Definition of economics.
If you wiki 'definition of economics' you will get different definitions of economics from Wikipedia. Different time and different author had different definition of the term 'economics'. From its earlier days of political economics to the later times of 'scarcity' and 'human behaviour', one thing pretty consistent has been 'science'. Economics is a science, even from the time of Adam Smith (1776), as
"an inquiry into the nature and causes of the wealth of nations," in particular as:
"a branch of the science of a statesman or legislator [with the twofold objective of providing] a plentiful revenue or subsistence for the people ... [and] to supply the state or commonwealth with a revenue for the publick services.[4]"
Ref:
Wikipedia search 'definitions of economics' at
http://en.wikipedia.org/wiki/Definitions_of_economics
Investopedia gave the following definition of 'economics':
A social science that studies how individuals, governments, firms and nations make choices on allocating scarce resources to satisfy their unlimited wants. Economics can generally be broken down into: macroeconomics, which concentrates on the behavior of the aggregate economy; and microeconomics, which focuses on individual consumers.
Economics is often referred to as "the dismal science."
INVESTOPEDIA EXPLAINS 'ECONOMICS'
Two of the major approaches in economics are named the classical and Keynesian approaches. Classical economists believe that markets function very well, will quickly react to any changes in equilibrium and that a "laissez faire" government policy works best.
On the other hand, Keynesian economists believe that markets react very slowly to changes in equilibrium (especial to changes in prices) and that active government intervention is sometimes the best method to get the economy back into equilibrium.
Ref:
Investopedia search 'definition of economics' at
http://www.investopedia.com/terms/e/economics.asp