Exploring Various Methods in Economics for Homework Problem Solving

May 10, 2023
Eve Johnson
Eve Johnson
🇺🇸 United States
Eve Johnson is a highly qualified economist with a Master's degree from New York University and extensive experience spanning five years in the field. Specializing in various areas of economics, Eve has successfully completed over 1700 homework assignments, showcasing her proficiency and dedication to her craft.
Key Topics
  • The relationship between economics and other studies
    • Politics
    • Technology
    • Other studies
  • What are the methods of economics?
    • Deduction
  • Induction
  • Equilibrium analysis
    • Conclusion-Economics as the science of scarcity and choice
  • Data response 1

Understanding the subject of Economics and solving economics assignments is very difficult if one does not understand what economics actually is. Students skip this step and face difficulties in completing their course. They in turn avail economics homework help. The more one thinks about what economics actually is, the more difficult it becomes to define anything accurately. For example, how would you define economics—as an art, a study, or a science? Let us try to understand with the help of this blog.

A further difficulty is that it may be difficult to define things in terms more relevant to the expert than to the layman. This, one of the earliest definitions of economics, so the study of wealth is simple enough to comprehend but not sufficiently exhaustive in a modern context. John Stuart Mill extended the scope of the subject matter when he defined economics as the practical science and distribution of wealth (the italics are mine). Economics is now seen to be the study not merely of the nature and causes of wealth but also of the distribution of that wealth. Today, economics is seen as the study of the allocation of scarce resources among competing ends.

Economics as a social science

At an earlier stage of man's development, one man was able to study the whole field of human knowledge. Knowledge was so limited that, it was necessary to devise all the subject divisions that we use today (see Fig 1.1). Socrates, Plato, Aristotle, and other great thinkers of Ancient Greece thought it proper to philosophize upon politics, economics, ethics, or any other study that interested them. In George Bernard Shaw's, cynically remarked that the fifteenth and sixteenth centuries. If all the economists were laid end to end, they would, as Vinci (11432–1519) expounded upon geology, not reach a conclusion. It is true that economics, chemistry, mechanics, and biology.

In modern times, this is not possible. Although physical sciences. The economist cannot make such there is some overlap, a simple dichotomy exists berseem the arts (such as languages, literature, and history) and the sciences (such as physics and difficulties economics), while the sciences may be further sub divided into physical and social sciences (see Fig. 1.1)

There are students of the physical sciences who A general suspicion of economics has arisen among those who think that economics is a peculiar mixture of current affairs and peripheral topics stolen from other subjects. This attitude was typified by one politician who, observing so many try out on the government's front bench, commented that he distrusted economists because they always reminded him of someone who took long steps to save his £10 pair of shoes and split his £15 pair of trousers. One wonders whether this criterion relied from an inability to distinguish between someone who is comical and someone who is an economist

If science is considered as an objective and disinterested search for truth involving the systemic formulation and arrangement of knowledge, then economics is indeed a science. It is a social science. It is concerned with the study of human beings living in society. Physical and chemical activities often take place without the presence of people. No economic, political, ethical, or psychological activity can cost people their jobs. This then is the real difference between a physical and a social science.

Is economics an exact science?

As a physical scientist, there can never be such an exact science as any of the accurate laws or foresees as a physical scientist, because economics as a science is subject to many What are these difficulties? First, the economist is

relationship between economics and other brances

Figure 1.1 The Relationship between Economics and Other Branches of Learning

We are not able to experiment in the same way as physical scientists. The economist is unable to control conditions as the physicist controls temperature and pressure. It is not possible in economics to exclude extraneous factors that interfere with the sphere of a particular investigation. For example, foreign trade figures are reasonably accurate, but they have to be amended as new statistics come to light.

Second, the economist is dealing with a world that is continually changing. There are nearly 4,000 million people in the world, and the number is increasing all the time. Thus, the demand for goods is always changing. even while the economist is studying statistics of supply and demand and how they relate to one another.

Are there economic laws?

A scientist attempts to formulate laws of universal application: an aspect of scientific work that favours the physical scientist since he is dealing with physical materials with relatively unchanging characteristics. The social scientist, on the other hand, must deal with people's habits and attitudes. Although an economist must always attempt to be objective, subjective influences inevitably infiltrate.

It may appear to be a universal 'law', based on observed facts of experience, that, if commodities are homogeneous, "people will always buy in the cheapest market." This would be the rational thing to affect prices. These are changing and acting upon one another. However, people do not always act rationally, and the purchaser may buy in a 'dearer’ market because of the sex appeal of the shop assistant, or because the product has snob appeal and is a status-symbol that will indicate to others that the owner has 'arrived'.

Consumers do not always buy in the cheapest markets. Status symbol advertising may persuade them to purchase relatively expensive articles (By permission of Rolex of Geneva)

The impossibility of framing laws that express a uniformity of economic behaviour has led the economist to talk of tendencies; Critics have said that in economics, things tend to happen, but they never really happen. The laws of economics are generalizations, which are more difficult to express accurately than the laws of physical science. So the economist has to use qualifying phrases such as "other things being equal", meaning that the law will be true and valid if the conditions governing the law remain constant, but so often the conditions are subject to sudden changes.

Nevertheless, economic laws may be regarded as useful, so long as it is recognized that conditions fluctuate. In some ways, these continual changes make economics and the other social sciences more vital and interesting. The economist is studying a living and exciting subject. Actions that are taken at one particular moment of time, for example, to cure inflation, unemployment, a balance of payments deficit, etc., may be effective, but in other circumstances, similar actions may bring different results because of new and previously unknown conditions. Even a physical scientist may not always be able to establish laws where no exceptions whatsoever exist. For example, Kepler, the great astronomer, discovered certain laws of planetary motion, the first of which stated that the orbit of a planet is an ellipse, with the sun situated at one focus. However, deviations in the predicted positions of the planet Uranus showed that its orbit was not elliptical. Some celestial body was causing a deviation in the expected motion of Uranus: the investigation that followed led to the discovery of a new planet. Neptune.

Likewise, it is dangerous to use economic laws for predictions. Attempts to forecast the future have frequently brought the science of economics into disrepute. Thomas Malthus gloomy outlook on problems of population, based largely on the so-called Law of Diminishing Returns, helped to earn for economics the title of the dismal science

Increased agricultural production by scientific methods and the greater importation of foodstuffs into the UK seemed to prove Malthus wrong. But there is still a pressure of population upon food supplies throughout much of the world. The contraries of economic laws are inevitable in the same way as other scientific laws. For us, the conditions governing those laws remain the same.

The relationship between economics and other studies


The old name for the science of economics was political economy. However, the very close connection between politics and economics had to be severed before economics could be accepted as a scientific study. The economist may advise the politician about the consequences and advisability of courses of action, but no problem is solely an economic problem. A politician must consider many other factors.

Since political decisions are so rarely made for economic reasons alone, economists often appear to disagree about such decisions. In an attempt to avoid the intermingling of politics and economics, the old title of "political economy" was changed to "economics" while the suffixes were used to bring the science of economics into line with accepted scientific subjects such as physics and mathematics. There is nothing wrong with economists being involved in politics in the empirical field so long as they constantly remind themselves that there are only economic and non-economic ways of reaching a given end. The politician must decide what ends should be satisfied; the applied economist should advise upon the choice between various alternatives.


It is not possible to achieve all desirable ends; otherwise, an economic problem would exist. The difference between economics and technology is that economics is concerned with the choice between various ends, while technology is concerned with the choice it means of achieving the chosen end. It is questionable whether time-and-motion studies, ergonomics, or even the application of automation justifiably form part of economic science. There may be an intermingling between economics and technology. Once the major economic decision has been made between the various possible alternatives, there may be minor economic choices within the framework of the main decision. Although it is largely a matter of technical considerations whether or not there should be a tunnel or a bridge across the Channel, or whether the tunnel should go under the seabed or be contained in the form of a cylindrical structure on the seabed, the questions of costs and prices must be examined, and this is of interest to the economist. It is within the province of the economist to consider whether it should be a road or rail tunnel. On an everyday scale, if a family decides to have central heating, then there are further decisions to be made about the source of power that should be used; oil, gas, or electricity. Once it has been decided which fuel to use, then the installation is merely a technical problem. Four conditions must be satisfied if an economic problem is to exist:

(a) The ends desired must be many If the Government were only concerned with the construction of a Channel tunnel, then it would not have to decide between that and other forms of expenditure.

(b) Time and means must be limited If there were sufficient time and resources to fulfil every end, then there would be no need to choose certain ends

(c) The time and means must have alternative uses Men and materials used to construct the Concorde could have been diverted to an extension of Hovercraft development

(d) The ends must vary in importance If the ends were of equal importance then no decision could be made A. A. Milne summed up such a situation in The Old Sailor who had so many things that he wanted to do :

That, whenever he thought it was time to begin, He couldn't because of the state he was in... And so in the end he did nothing at all, But basked on the shingle wrapped up in a shawl A decision must be made about what 'ends shall be chosen. Economics cannot exist without choices: economics may guide political action but it cannot. So economics is linked with technology and politics, but has distinctive provinces of its own. The economist is interested in the laws and data of other sciences, but he is not dependent upon them. Economics is a science in its own right.

Other studies

Whether or not a 'junky buys drugs from a 'pusher may be influenced by considerations of the law, ethics, chemistry, medicine, etc. The economist is mainly interested in what happens to prices when the supply is increased, perhaps by a new chemical process, or when the supply is decreased, possibly by the action of the law.

Economics is not a normative study like ethics where a 'norm or standard is established. The economist is involved in a positive study: he studies what is, rather than what ought to be. It is not up to us, its economists, to make value-judgments about drug-taking or smoking. We are interested in the prices of cigarettes, their production costs, and the taxation revenue from their sale. Economics is the only study that is solely occupied with prices, scarcity, and choice.

We have seen that economics is linked with other sciences. The psychologist studies how behaviour is affected by people responding less and less to given doses of a certain stimulus. A man who climbs a glass of Co ca Cola. He might agree to pay 40p for second glass, and 30p for a third glass, until he Deduction reaches a stage when his thirst is quenched and he refuses to buy any more A mental process is involved that is of interest to the psychologist, but the economist concentrates on prices and the operation of the so-called Law of Diminishing Marginal Utility In simple terms, the more of a commodity a man possesses, the less he will be prepared to pay for additional amounts. As with other scientific laws, there may be exceptions; for example, the philatelist may have an urge to collect an ever-increasing number of postage stamps. The economist is interested in price movements and in such concepts as a John Stuart Mill, and Jeremy Bentham. consumer's surplus whereby a purchaser apparently gains a greater satisfaction (or "utility') from an article than accords with the price that is charged for it. Bottles of Coca Cola may have a retail price of 30p irrespective of the thirstiness of the buyers. A simple table, cantered upon prices because the economist is primarily interested in prices, can be drawn up to illustrate the concept of consumer's surplus (see Table 1.1).

More than ever before, economics is mapping out for itself fields of its own, and these fields are increasingly relevant to human lives. Political elections are centred upon such issues as employment. inflation, taxes, and wages. Resources are in short supply and decisions have to be taken. These conditions of scarcity and choice are at the root of all human existence: knowledge of the pricing mechanism is vital to every citizen and voter. Increasingly, people are turning to the economist for guidance. It is up to him to be as objective and informed as possible so that the deep significance of his science receives the recognition that it deserves.

What are the methods of economics?


We have seen that a scientist attempts to state an accurate law or theory covering all individual cases governed by the operations of that law. This is deductive reasoning from the general to the particular. The earliest economists favoured the deductive method. These economists are usually referred to as the classical economists because they formulated the principles of the new science of economies in the eighteenth and nineteenth centuries. The most eminent classical economists were Adam Smith, Thomas Malthus, David Ricardo, Nassau Senior.

The classical economists attempted to explain, by the deductive method, the whole economic system by formulating a number of universal laws or theories, Smith put forward the labour theory of value according to which the price of an article depended upon the amount of labour expended in the production of it. Malthus propounded his principle of population, while Ricardo suggested all embracing theories of rent and wages. Senior, Mill, and Bentham had no hesitation in mixing politics with economics and setting down ways by which the government could improve the social services

There is nothing wrong in attempting to formulate laws for general guidance, so long as it is remembered that these laws are not immutable, and that we live in a dynamic, ever-changing society When economists use the deductive method they must constantly remind themselves that the effects of the so-called laws are not inevitable, but that mitigating circumstances may be at work. The danger of concentrating upon the deductive method is apparent merely by examining Adam Smith's

Table 1.1 The concept of consumer's surplus

Bottles of Coca ColaManufacturer's recommended pricePrice purchaser would be willing to payConsumer's surplus(extra satisfaction)



Total consumer's surplus - 50p

theory of value. The students will appreciate that Econometrics Society in 1930. The econometrician mach more labour is necessary to produce an applies scientific methods of inquiry to the observed facts and statistical data of economic history. In the empirical field, market research is used increasingly in order to investigate consumers preferences as a

(a) Labour may be inefficientif u takes one 20 preliminary to the launching of a new product. Thus it is possible to distinguish trends and even to make economic forecasts so long as the conditions do not change radically be worth twice as much as a table made by an experienced carpenter in 10 hours

(b) Labour may be misguided One might spend 1000 hours writing an economics textbook that no firm was willing to publish, and therefore no prices would be involved.

(c) The value of an article may change over a period of time When this occurs, the cost of the labour has no connection with the price of the article

Some of the classical economists used the hypo- thesis of an economic man who was motivated solely by acquisitive instincts. Man was imagined as being devoid of other motives such as sympathy, kindness, and compassion. The concept of an economic man was a useful device so long as it was borne in mind that the method was only a playful abstraction. However, man is such a complex being that it is often not realistic to separate economic from non economic motives. Economic man was ridiculed by opponents of the science, but the concept of economic man could still have its uses so long as it is borne in mind that the method is merely a limited academic device.


The inductive method of reasoning involves studying particular instances and then suggesting general tendencies that hold good in the majority of cases An observer may note a large number of swans and conclude that all swans, are white. This realistic assumption might stand the test of time until the discovery of Australia reveals some black swans in existence

A study of economic history provides a useful basis for establishing economic principles. However, conditions do not always repeat themselves exactly: people, institutions, and nations are always changing their characteristics. The inductive method makes use of interviews, questionnaires, and sample surveys. and statistical tables There is a modern tendency to make more use of econometrics or numerical economics, especially since the formation of The Micro-economics, i.e., the study of the economic actions of individuals or relatively well-defined groups such as firms or industries, helps the economist to analyse price determination. There is a close relationship between the inductive method of reasoning and micro-economics. The study of large aggregates, or macro-economics, is often more favoured by modern economists, but it is only a useful study when it is correlated with valid micro economics. It is useful to study the economic behaviour of large groupings, but the study can only be correctly interpreted if the individual actions of those that make up the group are also analysed and comprehended. So there has been an attempt to utilize both inductive and deductive methods and to synthesize their application

Equilibrium analysis

Equilibrium analysis considers the economic world us one of interrelated quantities always seeking a balance. All economic phenomena are regarded as interdependent. The great advantage of this concept is that all the old, watertight compartments, into which the subject was once divided, can be broken down. Some of the classical economists classified the subject into distinct divisions such as production, exchange, distribution, and consumption. They compared economic production with the backing of a gigantic cake. The making of the cake was a single process and its distribution was a separate operation. It was Professor Wick steed who drew attention to the fact that the economic world can be likened to an ever-flowing circle of exchange.

A cynic has declared that economics may be compared to astronomy since both are up in the sit Yet a useful comparison may be made between the two subjects because both are concerned with inter dependent things. The sun, earth, and moon have an effect upon each other, likewise, economic concepts such as cost, utility, supply, demand, and price, all influence one another. The forces of supply and demand help to determine prices, but in their turn prices influence supply and demand. As wind flows from high to low pressure areas so prices tend to change in an attempt to equate supply and demand. If one price moves, then the others will be adjusted until equilibrium position is reached. There are live basic factors continuously at work:

(a) Growth of population

(b) Increase in capital.

(c) Improvement in productive methods

(d) Elimination of the less efficient by efficient.

(e) Expansion of consumer wants

If these changes were not taking place, we should live in a static rather than a dynamic society. Bat these changes are always at work and equilibrium analysis is the method of examining the process whereby the economic system strives for self adjustment and the analyst studies consequences of Do rats hold the key to economics? Disturbances in the equilibrium position. Thus the economist is concerned with the equilibrium price, the equilibrium firm, and the equilibrium industry. It is a useful procedure even though the equilibrium or truly balanced position may never be reached.

Conclusion-Economics as the science of scarcity and choice

It is better to compromise between the narrower wealth or welfare concepts of economics and broader definitions, obviously economists do all kinds of things that are only very vaguely connected with economics, yet it can be argued that even sleeping is indirectly associated with economics, because if a man is sleeping he has sacrificed the satisfaction of some other want. This forgone alternative is the opportunity cost or the cost of going without something Modern economics is based upon the study of scarcity, and how a choice is made through the price system. Professor Cairncross, in Introduction to Economics (Butterworth), puts for ward a possible definition: 'Economics is a social science studying how people attempt to accommodate scarcity to their wants and how these attempts interact through exchange. This definition has the following merits:

(a) "Social' suggests the involvement of people.

(b) "Science' brings out the objectivity of the study

(c) 'Scarcity (whether of goods, people, or time) is the basis of all economic study.

(d) Accommodation leads to considerations of an equitable distribution so that welfare is maximized.

(e) Exchange in a modern economic society, must be in terms of money and prices.

The fundamental economic problem facing all solicits is what, home, and for whom to produce. In a command economy the state decides. In a market economy the problem is decided by the interplay of the forces of supply and demand. In a mixed the more economy both the government and market forces play their part: thus, in the UK the government controls the public sector including the nationalized industries, while the private sector largely operates under a free enterprise system.

Data response 1

Read the passage and answer the questions.

Do the economists, those pundits who claim to prophesy the conditions of trade, really know anything? So often are their predictions wrong that one suspects that they know very little. Their inability to experiment makes economics a field science like astronomy and geology in which data come from the real world instead of from a laboratory. But the trouble is that unlike astronomers and geologists, scientifically speaking the economists suffer from an almost complete lack of proven principles

It was once thought that proven principles existed in economics that were akin to natural laws It used to be supposed, for example, that when unemployment. Reached a particular level (a number that could be calculated from an equation), then the inflation rate would begin to fail: but it did not work. Although the essential connection remains undisputed, nobody has ever found out what number of unemployed in a nation of a given size will halt inflation And they probably never will, for it is unlikely that any such number could be precisely determined,

Why do people have this infuriating habit of refusing to behave predictably like atoms or molecules? The reason, obviously, is that there are too few people. For instance, in Britain there are only about 20 million economically active people whose behaviour one may try to predict But there can be as many molecules of water in a teaspoon as there are teaspoonfuls of water in the Atlantic Ocean! No science can predict the behaviour of a single molecule, but the behaviour of millions and millions of molecules must follow the laws of probability. Yet this cannot apply to economic prediction, which concerns itself only with a few million variable units, and is therefore at best a feeble science.

One group of American experimenters set out to numbers of people need not necessarily produce wrong answer the controversial question about the effect of answers Experiment may transform economics from its rising wages do they encourage people to work harder present state of being a set of imprecise axioms into a or do they merely increase the deal for leisure? Two profound statistical science psychologists, Howard Raclin, of the State University of Perhaps more important still, people who try to study. New York and Leonard Green of Washington economics with computers trying to apply pure math University are trying to solve the problem by studying mastics to the behaviour of humans, may (opt least until computing is considerably more developed) be on the wrong track The instincts and emotions of animals could prove a purer quire to the way things really (Source: adapted from Adrian Bell, The Daily Telegraph 1 December 1980)

the behaviour of rats The rats in their laboratory were confronted with two buttons One on being pressed released a quantity of food and the other a quantity of water. The food and happen water represent wages, and the number of presses

needed to obtain them an prices The scientists set out to simulate a real economy by manipulating the prices and wages They cut the audient of food that would appear on each press of the but or and they increased the quantity of water The result? The animals bought more water and less food, a dissimilar to field sciences such as astronomy and choice that humans make when commodity prices geology?

1. Why should the predictions of economists some times be proved wrong?

2 in what way is economics(a) similar and (b)change What happens when prices fall drastically (er when wages rise, which amounts to the same thing) in other words, if the rats could get very large amounts of food and water for very little effort? They simply lost interest in working re in pressing buttons

Relationship between unemployment and the inflation rate

3. According to the passage, why is it difficult to treat In the words of the two researchers non human people as rational beings who would always workers are willing to trade more income for unsure it behave predictably like atoms or molecules? the price is right The experiment, which has also been 6 Give a defence in answer to the charge that carried out with pigeons indicates the existence of a coral level of wages beyond which higher productivity is unattainable Another equally fascinating experiment involved token money in a mental home on Long Island The meant by female inmates earned varying payments for such (a) A real economy chores as making their own beds and an hour's work in the laundry They were free to spend their token

earnings on sweets cigarettes, and other items A cuneus discovery was made it turned out that the pattern of earnings of token money in a mental intercompare closely with that of the distribution of tuition compared closely in miniature with that of the distribution of income in the USA as a whole. The best- paid of the mental inmates received 41.2 per cent of all earnings compared with the national average of 41.5 per cent. The lowest-paid fifth get 74 per cent against

5.2 per cent in the real economy Il experiments are possible, the analysis of small numbers of people need not necessarily produce wrong answers. Experiment may transform economics from its present state of being a set of imprecise axioms into a profound statistical science.

Perhaps more important still, people who try to study economics with computers, trying to apply pure mathematics to the behaviour of humans, may (at least until computing is considerably more developed) be on the wrong track. The instincts and emotions of animals could prove a surer guide to the way things really happen.

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