What is economics? What is the nature of economy?

* what is economics?

It's defined in different ways by economist, however, in general economist all define the "economics". In the spirit of emphasizing issues concerning to needs, economic scarely, the choice of approriate economic solutions. According to Adam Smith (1723-1790) the founder of economic science, economic is " science of wealth". According to J.B.S (1767-1832) economics is the understanding of "rules governing that control the establishment of poccession distribution and consumtion". E.M. and some other economists define economics the science "research how scare resource are used to satisfy human needs in society. In concern on main production activities, production distributies and spending, and institutions, operation that make these activities more faciliate and confortable.

*demand/needs

Spritual life at first and then in the social life and mental life of human being demand that need should be define and satisfied. These demands may be from individual or community and they often change following to space and time. M - a theorist of hunam demands said that human nature is created in the way to hierachy of needsto survival demand, demand level (1) to the highest level (self-perfection demand 5th grade). Demands level 1 include: demands of food and drink, rest, breath. They means (i.e) "physical" demands. Demands level5 include are the need to express talent, creativity, power, sense of asthetic, strength, they i.e spritual demands at highest level.

In every society, the satisfaction of needs is limited by personal income, the scarely of economic services and the level of current economic standard.

* economic resuorce shortage

It's common knowledge that some wealth is naturally provided in unlimited quality (e.g:air) in other cases into human labouris generly added in other to turn natural resources into economic wealth. However, both human labour and natural resouces are limited. Compared to almost unlimited demand of human being (both meterial and spritual demands), the limited of human natural resources is the main cause of economic resource shortage. Due to resources limitiation, force people to make choices in production of goods and services inorder maximise the profit from what we have. However it's noted that we accept this choice we have to give up another choice so that we'll have "another thing". 'another thing" here is "cost" of our economic choice of each individual, enterprise and society.

WHAT IS LAISSER/FAIRE ?

What is market economy? Market economy is an eonomy sys.which is regulated primarily by the market, in which price was determined by supply and demand relations, by enterprise those have the rights to decide what and how they produce, to whom they buy inoder to get maximun profit.

A.d (1723-1790) and his book "the wealth of countries" was the first person to set up foundaion for the doctrine "free market" (laissiez-faire). The mian contents of this doctrine are:

A - Both individuals and businesses have suitable attitudes to consuming and producing activities. They usually find self-interests and maximize their profit.

B - The poerations of the economy were ensured by a "invisual hand". It arranges and combines actions of each individual. That invisual hand is an organ implementing a natural order which was expressed in market law.

C - Market is the prime factors of economic adjustment supply and demand of goods, labour and capital will meet each other to creat an equihbrium price: product price, wage or interesr rates.

D - In market, good exchanges were done by curency.

E - Finally, according to doctrine of those who were considered as "neoclassical economist", utility value and its effect to price and quanlity of goods should be considered carefully. Besides they also emphasize theory of marginal value, particullarly the consequence was caused by adding an additional unit into a certain process.

Definitions of types of market

The terminology "market" was used commonly in daily language. In economic books, they give a lot of definitions of market such as:

Market is all activities of buying and selling a kind of goods and service in particular at one or more geographically dispered locations.

Market is a process in which buyer and seller interact with eachother to determine price and quantity of exchanged goods.

Market is a meeting-place at a particular time betwween supply and demand of goods and service.

Market is a self-coordinating mechanism of seller's and buyer's behaviour at the price basis.

It's nesccessary to remenber that: market may not have a particular location, for example, stock market, telephone and telex order...

There are many different ways of market's classification according to different criterions. In this case, we study markets relating to economic cycles as the following.

a) Commodity and service market.

Commodity and service market can be devided into usual consumer goods and service market such as: food, clothes, home ppliance, entertainment,..and capital goods.

b) Labour market

In this market, there are households providing labours, whereas, bussiness supply employment and pay salary. Labour market includes - all the active population, i.e the entire of population at the labour age.

c) Capital market

In this market, supply and demand exists and connects closly with financial skill. Normally, there are 3 types of capital market.

- Monetary market has function as financial supplier or short-term and medium-term investiment.

- Financial market has the function as fianancial supplier or long-term investiment, for example, stocks and bonds.

- Foreign exchange market has the functions of exchanging home currency for foreign currency (national currency) for foreign currency and vice-versa.

in this caes, it's neccesary to say about the terminology "market mechanism".

Firstly, market mechanism refers to using price and quanlity consumed in the market to predict output or to distribute resources.

So, the basic feature of market mechanism is the price signal. The system of prices is an effective information medium. It's necessary to emphasize that: market mechanism, is only a mean to archieve the target, not its inner self.