Please explain in your own words.

1. What is economics?
2. a) What is opportunity cost?
b) Give an example of opportunity cost.
3. Discuss the law of demand?
4. Determine a normal good?
5. Determine an inferior good?
6. Determine the law of supply?
7. Determine a surplus?
8. Determine a shortage?
9. Determine a price ceiling?
10. Determine a price floor?
11. a) Determine a fixed cost?
b) Give an example of a fixed cost.
12. a) Determine a variable cost?
b) Provide an example of a variable cost.
13. What is the distinction between economic profit and accounting profit?

Various eminent economists have defined this subject in accordance with their different understanding or realization of economic problems. We have to accept this subject as a social science concerned with the attempt of the people to accommodate scarcity to their wants and how these attempts interact through exchange. But we have to memories only that which may be acceptable to all the Economists and may be explained term by term to give definition of the subject. We confine ourselves, as students, with the definitions given by Robbins, Alec Cairncross and Paul Samuelson quoted in the solution below.

Committing to memory the terminologies is important from the point of an intelligent comprehension of the subject, why any particular economic event occurs in a particular manner, when or how a solution for it could be found before it affects all of us so badly. Why the major economies are doing so poorly world over these days, adding to unemployment, accumulation of debts, and closure of factories and so on, how long it will take to recover from this cycle, what is the remedy etc.

Economics to overlaps with other subjects like Ethics, Politics, and Psychology as we have to understand how wants are met and satisfied. Ethics says it is harmful to smoke and we must give the habit. Then the manufacturing of cigarettes will stop with consequent result of unemployment in this industry. Closure of an industry is economically wrong as it has created an adverse chain reaction in agriculture, transport, advertising, packing, factories which manufacture machineries for manufacturing cigarettes.
Unemployment would have political repercussions and politicians of every hue and cry would exploit the situation in their best political interest. They will present completely different picture to the public which will resonate in the senate. Politics studies our wants from the angle of order, justice and equality. These wants should be satisfied by guiding the people in particular way.

Many people believe smoking reduces mental tension. How far it is true only psychologists can explain!

Here we must bear in mind that economic assumptions are based on motives and hence if we loose touch with reality we avoid psychology. Whether it is moral or immoral for a business man to amass wealth when millions are starving are two different questions. Businessman strives to maximize profit and his motive is to acquire power and gain social distinction. The motives become too complex. The situation has reached where the economist must seek the knowledge of Psychology.

To sum up we see that no subject can be studied in complete isolation, concentrating on one and ignoring other