Mada za sehemu hiiThe Subject Matter Of EconomicsMada 6
There are economic statements which show the relationship between economic variables. It shows that a certain thing happens under given economic conditions. It regulates relationship in main economic activities of production, exchange, consumption and distribution.
Lionel Robbins defined economic laws as a statement of uniformity which govern human behavior concerning utilization of resources for achieving of unlimited ends. Example of economic laws is laws of demand and supply.
Therefore, economic laws show tendencies of what happens under given economic conditions thus they express people's reaction to economic forces. e.g. In the example about the laws of demand show that consumers tend to buy more as the price of commodity decreases and suppliers tend to supply more when the price of commodity increases.
Sometimes people believe contrary to the laws e.g. under given conditions of exceptional demand people with low-income demand more inferior goods at higher price that at lower price.
- They are not static i.e. they change with time and economic conditions.
- They are hypothetical i.e. they are based on assumptions.
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Pure and Natural laws. These emerged purely from interaction of economic variables such as price and quantity demanded as supply scarcity and choice etc. These laws can operate in all economic systems. e.g. the laws of demand and supply and the law of diminishing marginal utility.
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Law of super-structure (Government or state law). These are laws provided by the government or state to regulate or control economic activities. e.g. law of taxation, law of controlling consumption of certain commodities. Law of stabilizing the economy etc.
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Law of specific economic system. These are the laws specific to a certain economic system and they control relationship among the people in the process of production, consumption distribution, exchange once a system is replaced by the new system. e.g. of specific laws is:
- Laws of private ownership of means of production.
- Laws of public ownership of major means of production.
These are laws which operate in all economic systems whether socialist or capitalist e.g. Demand and supply.
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Guide economic events and serve as a basis for the formulation and evaluation of economic policies e.g. the law of demand and supply. Help the tax authority to fix a rate that will not cause a big increase on price.
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They are useful in planning process i.e. planner can forecast implication of various plans by using economic laws of what will happen in production if domestic industries are given subsidizing.
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