Economics Past Paper PDF

**Unit** 3\. (Re)Thinking Economics **Teacher** Mr. Jose Zuniga **Economics** Economics is a field of study that has become increasingly relevant in our globalized society. The economy is part of our collective conscious and a buzzword that links personal finances to big business and internatio...

**Unit** 3\. (Re)Thinking Economics **Teacher** Mr. Jose Zuniga **Economics** Economics is a field of study that has become increasingly relevant in our globalized society. The economy is part of our collective conscious and a buzzword that links personal finances to big business and international trade deals. Economics deals with individual choice, but also with money and borrowing, production and consumption, trade and markets, employment and occupations, asset pricing, taxes and much more. What then is the definition of economics? One way to think of it is **the study of what constitutes rational human behaviour in the attempt/effort to fulfil needs and wants given a world with scarce resources.** In other words, economics tries to explain how and why we get the stuff we want or need to live. How much of it do we get? Who gets to have more? Who makes all this stuff? How is it made? These are the questions and decisions that economics concerns itself with. As an individual, for example, you constantly face the problem of having limited resources with which to fulfil your wants and needs. As a result, you must make certain choices with your money -- what to spend it on, what not to spend it on, and how much to save for the future. You\'ll probably spend part of your paycheck on relative necessities such as rent, electricity, clothing and food. Then you might use the rest to go to the movies, dine out or buy a smartphone. Economists are interested in the choices you make, and investigate why, for instance, you might choose to spend your money on a new Xbox instead of replacing your old pair of shoes. They would want to know whether you would still buy a carton of cigarettes if prices increased by \$2 per pack. The underlying essence of economics is trying to understand how individuals, companies, and nations as a whole behave in response to certain material constraints. Adam Smith (1723 - 1790), is often considered the \"father of modern economics.\" His book \"An Inquiry into the Nature and Causes of the Wealth of Nations\" (1776) was the first fully elaborated attempt to understand why some nations prospered while others suffered widespread poverty. Smith, however, was not the first to write on economic matters. Other scholars of what was then known as political economy wrote prior to \"The Wealth of Nations,\" but Adam Smith was one of the first to identify the unique economic changes that accompanied the birth of industrialization and capitalist production. Smith's work was followed by David Ricardo's \"Principles of Political Economy and Taxation\" (1817) and later by Karl Marx in \"Capital\" (1867). Each of these authors sought to explain how capitalism worked and what it meant for producers and workers in the capitalist system. In the late 19^th^ century, the discipline of economics became its own distinct field of study. Alfred Marshall, author of \"The Principles Of Economics\" (1890) defined economics as a social science that examines people\'s behaviour according to their individual self-interests. He wrote, \"Thus it is on one side the study of wealth; and on the other, and more important side, a part of the study of man.\" In the early 20^th^ century, however, there was a push toward legitimizing economics as a rigorous science alongside the physical sciences like chemistry and physics. As a result, **mathematical models and statistical methods were brought to the forefront along with a number of strong assumptions that are needed to make those models work**. For example, **modern mainstream economists make the assumption that human beings will always aim to fulfill their individual self-interests. It also assumes that individuals are rational actors in their efforts to fulfill their unlimited wants and needs. It also makes the claims that firms exist to maximize profit and that markets are efficient.** This school of economics, which has come to dominate both the academic field of economics as well as the practical application of economic theory in policy and business, is known as neoclassical economics.