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Read the text to find out what economics deals with; complete the diagram.

Economics is a social science that analyzes the production, distribution

and consumption of goods and services. The term economics comes from the Ancient Greek (“management of a household, administration"). Current economic models emerged from the broader field of the political economy in the late 19th century. A primary stimulus for the development of modern economics was the desire to use an empirical approach more akin to the physical sciences.

Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout the society, in business, finance and government, but also in education, the family, law, politics, religion, etc.

There are three main economic systems: planned (or “command economy”), market and mixed economies. A planned economy is the one with a large amount of central planning, when the government takes all the decisions concerning production and consumption. A market economy is the system based on private enterprise with private ownership of the means of production and private supplies of capital. A mixed economy contains elements of both market and planned economies.

Common distinctionsare drawn between various dimensions of economics. The primary distinction is between microeconomics and macroeconomics. The former focuses on individual economic units. It studies the economic behavior of either individual consumers or firms or industries. The distribution of products and income among all these units is also analyzed by microeconomics. The latter studies issues affecting an entire economy, including unemployment, inflation, economic growth, monetary and fiscal policy. Microeconomics, like macroeconomics, is a fundamental method for analyzing the economy as a system. It considers households and firms interacting through individual markets as essential elements of the economy. Other distinctions include: between positive economics and normative economics, between economic theory and applied economics. Positive economics deals with the objective of the working of the economy. While it tries to explain how society makes decisions about consumption, production and exchange of goods, normative economics offers prescriptions or recommendations based on personal value judgements.

There are also several specialized areas of study. Among them are money economics, international, labour, industrial, agricultural, mathematical, growth economics, etc.

Economic analysis includes the theory of supply and demand. The interaction

of supply and demand will result in the establishment of an equilibrium or market price. The market price is the one at which goods or services will actually be exchanged for money. The price at which supply equals demand is known as the market price, or the point of equilibrium. Economic analysis also examines market structures, such as perfect competition and monopoly for implications as to behavior and economic efficiency.

(http://en.wikipedia.org)

Practice 1. Re-read the text to find out which of the paragraph describes:

- common distinctions between different spheres of economics;

- the main economic systems;

- an equilibrium price;

- different branches of economics;

- where the economic analysis can be used.

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