Economics is the social science that studies the behavior of individuals, households, and organizations (called economic actors, players, or agents), when they manage or use scarce resources, which have alternative uses, to achieve desired ends. Agents are assumed to act rationally, have multiple desirable ends in sight, limited resources to obtain these ends, a set of stable preferences, a definite overall guiding objective, and the capability of making a choice. There exists an economic problem, subject to study by economic science, when adecision (choice) is made by one or more resource-controlling players to attain the best possible outcome under bounded rational conditions. In other words, resource-controlling agents maximize value subject to the constraints imposed by the information the agents have, their cognitive limitations, and the finite amount of time they have to make and execute a decision. Economic science centers on the activities of the economic agents that comprise society. They are the focus of economic analysis. The traditional concern of economic analysis is to gain an understanding of the processes that govern the production, distribution and consumption of goods and services in an exchange economy. An approach to understanding these processes, through the study of agent behavior under scarcity, may go as follows:
The continuous interplay (exchange or trade) done by economic actors in all markets sets the prices for all goods and services which, in turn, make the rational managing of scarce resources possible. At the same time, the decisions (choices) made by the same actors, while they are pursuing their own interest (their overall guiding objective), determine the level of output (production), consumption, savings, and investment, in an economy, as well as the remuneration (distribution) paid to the owners of labor (in the form of wages), capital (in the form of profits) and land (in the form of rent). Each period, as if they...
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