UNDERSTANDING THE CONCEPTS OF ECONOMICS

DEFINITION OF ECONOMICS:

The English term ‘Economics’ is derived from the Greek word ‘Oikonomia’. Its meaning is ‘household management’. Economics was first read in ancient Greece. Aristotle, the Greek Philosopher termed Economics as a science of ‘household management’. But with the change of time and progress of civilization, the economic condition of man changes. As a result, an evolutionary change in the definition of Economics is noticed. Towards the end of the eighteenth century Adam Smith, the celebrated English Economist and the father of Economics, termed Economics as the ‘Science of Wealth’. According to him, “Economics is a science that enquires into the nature and causes of the wealth of nations”. In other words, how wealth is produced and how it is used, are the subject-matter of economics. In the subsequent period Alfred Marshall defined Economics by saying, ‘Economics is a study mankind in the ordinary business of life’. In other words, according to Marshall, Economics studies not only the wealth but also the activities centering the wealth. In modern times more realistic definitions have been given to economics. In social life human wants are unlimited, but the means to satisfy those wants are scarce. Economics studies how to use the limited resources to satisfy the unlimited wants of men. In the words of Lionel Robins, the modern economist, ‘Economics is a science which studies human behavior as relationship between ends and scarce means which have alternatives uses’. So, Economics as a social science studies how people perform economic activities and how they try to satisfy unlimited wants by the proper use of limited resources. Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

SCOPE OF ECONOMICS:

Economics is a social science. The subject matter of economics deals with the analysis of economic problems of people in the society and the satisfaction of their wants. With the evolutionary changes of the society and its civilization, the subject matter scope of economics has expanded.Scope of economics is discussed below:

  1. As social science economics deals with the economic activities of human being. One person day to day money earning and money spending activities constitute the subject matter of economics. For example, parents’ affection and nursing service for their children are not the subject matter of economics.
  2. Resources are needed to satisfy people's wants. So, the availability of resources and their use are important subject matter of economics. Adam Smith has termed economics as the “Science of Wealth”.
  3. People's wants are unlimited. But the resources to satisfy the wants are scarce. Economics discusses how men can get the maximum satisfaction by using the scarce means to satisfy wants on the basis of priority. So, as subject matter of economics, the scarcity of resources is considered very important.
  4. People's wants are related to production, exchange, distribution and consumption. Again, currency, banking system, public finance, trade etc is also parts of economic activities. Economics discuss these issues also. Besides, how economic development of the country is achieved through the means of economic planning is also included in the subject matter of economics.
  5. Economics discusses the economic problems and economic activities and indicates proper solution to these problems. Economics also discuses about the value judgment of human actions and behavior.

Importance of the study of economics

In modern times the importance of the study of economics is infinite. It is not only provides us knowledge, but also helps to solve the different problems in real life. The importance of economics in different areas of human life is discussed below:

In the daily life of people: People are confronted with manifold wants in their daily life. But the resources to satisfy those wants are limited. By studying economics we can know the use of limited resources to satisfy alternative wants on the basis of priority.

In the proper use of resources: We can learn about the use of resources with the knowledge of economics. Study of economics helps us to understand about how to produce the maximum output by the proper use of limited resources.

In state management: The knowledge of economics is indispensable to manage the economic and development activities of a state. For this reason the politicians and the govt. officers need to have proper knowledge of the currency system, banking system, tax system, industrial and trade policy, budgeting etc. The knowledge of economics helps in managing the state affairs.

To social workers: Economic causes lie at the roots of maximum social problems. The social workers need to have knowledge of economics to diagnose and solve the problems of poverty, unemployment, illiteracy, excessive growth of population, lack of housing and medical facilities etc.

To the labor leaders: The leaders of the workers should have the knowledge of economics for improving their bargaining capacity in respect of the formation of trade unions, the increase of wage and other benefits, the improvement of their working conditions etc. In economic planning: It is necessary to have sound knowledge of the economic problems and the available resources for the formulation and implementation of economic plans for the country. For this reason the knowledge of economics is indispensable.

Acquisition of knowledge of international issues: The knowledge of economics is necessary to know and understand the socio economic events of different countries, international relationship, commerce etc.

 

Author: AFULA F.

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