Economics was derived from two Greek words 'Oikos' which means a house and 'nomos' which means house. Economics is the study of how individuals and firms allocate scarce resources among unlimited human wants. Economics is a social science. It is closely related to other social sciences such as politics, ethics, sociology and anthropology. It is however distinguished from other social sciences by the fact that it concentrates on one facet of human behavior which is how they allocate resources between alternatives to maximize satisfaction.
Economics is studied using the scientific method which involves; developing hypothesis, looking for data, analyzing the data and then reaching a conclusion. Economics is analyzed in two ways, that is; positive and normative economics. The main concern of positive economics is objective statements of what actually happens or what is likely to happen. Economic decisions are made based on facts and empirical evidence. It is also referred to as 'what is' economics. On the other hand normative economics involves subjective or value judgment .Economic decisions are made based on personal views and value judgment. It is also referred to 'what ought to be' economics.
Economics has two main branches; micro economics and macro economics. Micro-economics is concern with how people and individual firms allocate limited resources among competing human wants or production alternatives. On the other hand macro economics is concerned with aggregate variables of the economy as a whole. Macro economics attempts to explain how economic factors and behaviors influence these variables and how these variables in turn affect the whole economic system. Macro economic variables include; inflation, employment level, economic growth and balance of payment position.
Economics is only concerned with resources that are limited in supply in relation to their demand. Economics therefore does not study free goods such as air. Study of economics is crucial for individuals, production firms and countries in deciding the most rational way of allocating resources.