What Is the Definition of Economics ?

Economics is a social science concerned with the production,drstribution and consumption of goods and services.It studies how individuals, businesses, governments and nations make choices on allocating resources to satisfy their wants and needs , and tries to determine how these groups should organize and coordinate efforts to achieve maximum output.

Economics is the study of mankind in the ordinary business of life -Alfred Marshall.

Economy is the art of making the most of life -GEORGE Bernard Shaw.

The theory of economics is a method rather than a doctrine , an apparatus of mind, a technique of thinking , which helps its possessor to draw correct conclusions-John Keynes.

Economics is a science of wealth- Adam Smith.

What is the Scope and Subject matter of Economics ?

 Scope means an area of study or coverage of the particular subject. Scope of economics means area covered by subject economics. The whole topics which should be studied in economics. The scope contains two headings. They are subject matters and nature of economics .

Subject matter of economics  

The area covered by economics is the subject matter of economics. The subject matter of economics is studied with the help of following three points

1. On the basis of definition

2. Traditional approach

3. Modern approach

On the basis of definition

Different economists have a different view regarding the subject matter of economics. The classical economists, Adam smith considered economics as a science that deals with wealth. Therefore, the subject matter of economics is the study of nature and causes of the wealth of nation. The leader of Neo-classical economists, Ahmed Marshall considered economics as the science of welfare. Therefore, the subject matter of economics in the study of mankind in the ordinary business of life, The economists, L.Robbins considered economics as a modern or scarcity and choice definition. Therefore, the subject matter of economics is the study of human behavior as a relationship between ends and scarce means.

Traditional Approach

According to the traditional approach, economic deals with the activities of man. It deals with those activities of man through which he tries to satisfy his wants. There are three fundamental economic wants such as food, cloth ,and shelter. As we know the human wants are unlimited but the means to satisfy them are limited. When the first want is satisfied, second wants arises and to fulfill the second urgent want comes. In traditional approach, the continuous circle of unlimited wants, efforts and satisfaction are known as a subject matter of economics.

According to traditional approach, subject matter of economics includes following things:

Consumption: Consumption means the process of destroying the utility. In consumption, we try to analyze the demand of the consumer regarding goods and service to drive the maximum satisfaction.

Production: It is the creation of utility. The theory based on short- run and long-run production functions are studied under it. In production, we try to analyze the behavior of the producer and what does a producer allocate his resources so to get a maximum profit out of his production.

Exchange: In exchange, we study the buying and selling process of goods and how the price of goods and services are determined by various markets like perfect competition ,monopoly ,monopolistic, oligopoly and duopoly.

Distribution: In distribution, we study the distribution of national income among the factor of production like land, labor, capital and organization. It involves the sharing of what is produced. It includes law and theory of wage , rental interest and profit.

Public Finance: Public finance is related to the government income and expenditure. In public finance, we study the different sources of income of the government and how does the government spends its income. It includes a theory of taxation, government revenues ,and expenditure.

Modern Approach

According to modern view, the subject matter of economics is divided into two parts:

1.Microeconomics: Microeconomics studies the economic activities and behavior of small individual units of the economy. It means microeconomics can be defined as the study and analysis of the behavior of individual economic units. For example, Microeconomic studies about the behavior of an individual consumer, one producer, a firm, a household, one industry and so on.

According to K.E.Boulding,”Micro economics is the study of a particular firm, household, individual price, wages, income, individual industry and particular commodity.”

 2.Macroeconomics: Microeconomics is a branch of economics dealing with the performance, structure, behavior and decision-making of an economy as a whole, rather than individual markets. It is concerned with nature, relationship and behavior of such aggregate quantities and averages as national income ,total consumption, savings, investment, total employment ,general price level aggregate expenditure and aggregate supply of goods and services.

According to K.E.Boulding,”Macroeconomics is the study of the nature, relationship, and behavior of aggregate and averages of economic quantities.”

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