An Economic Way of Thinking

How can you think like an economist?


Economics is both a social science and a way of thinking about how the world works. It can help us unravel everyday mysteries and make better decisions about matters large and small.

What is economics all about? Economics is the study of how individuals and societies use their limited resources to satisfy their unlimited wants. Positive economics looks at the way things are and why. Normative economics looks at the way things ought to be. In examining how people make decisions about production and consumption, economists attempt to get beneath the surface of everyday life.

What principles guide an economic way of thinking? Economists have identified several principles that can help us understand how people make choices and how their decisions affect others. They include the following:

What tools do economists use? Economists use the scientific method to analyze economic events and predict outcomes. They use graphs to analyze the relationship between two sets of data. They also use economic models to better understand how the world works. An economic model can take various forms, such as a diagram, an equation, or a description