Meaning of Economics

The study of human activities focusing on unlimited human wants, scarce resources and the alternative use of these resources.  Is concerned with economics . It is a science concerned with human welfare through different economic activities.It got formal recognition as a specific discipline of study after the publication of a book named “An Enquiry Into The Nature and Causes of Wealth of Nations” by Adam Smith in 1776 AD. Before the publication of this book, economics was considered a part of political social, or ethical science.

Economics studies the price, consumption, exchange and investment behavior of an individual. It studies individual as well as the total aspect of demand, supply, price, saving, consumption, investment etc. of a society or country. It is concerned with the expansion and growth of national wealth with human welfare in presence of scarce resources and unlimited wants. It is a science and art of studying the economic activity of an individual to the nation as a whole with the help of supporting disciplines like sociology, anthropology, social science, psychology, statistics, human behavior analysis etc.

Key Definitions

Defined By	Definition
Adam Smith	“Economics is the science of wealth”
Alfred Marshall	“Economics is the study of humans, concerning the ordinary business of life. It studies that portion of the personal and social activities, which are closely related to the attainment of material resources, related to welfare and its utilization”
Lionel Robbins	“Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses”

From the above discussion and definitions, it is clear that economics should be understood from different perspectives. It can be considered as a broader field of study whose different dimensions are focused depending upon the subject matter, scope, need and relevance of the perspective thereof. However, its understanding can be built in following points:

• Economics is a social science studying how people attempt to accommodate scarcity to their wants
• Adam Smith regarded economics as a science of wealth that deals with the process of production, consumption and accumulation of wealth
• Marshall regarded economics as the study of human activity for human welfare through the means of human earnings and spending
• Robbins explained economics as the study of unlimited human wants, scarce resources, their relationships and alternative use
• Economics studies individuals, the aggregate economy and the economic system
• It is the study of man and society choosing among alternative use of resources with or without the use of money or money means

Scope/ or Subject Matters of Economics

The area covered by economics is the scope of economics Under the scope of economics, the main subject matter of economics, nature of economics and relationship of economics with other science are studied. As human behavior goes on changing according to time, needs and situation, the subject matter of economics also goes on changing. The subject matter of economics can be divided on the following basis:-

1.    Basis of Definition Considered

Different economists have given different views regarding the subject matter of economics. Classical economists have defined economics as the nature and causes of wealth as the subject matter of economics. But according to Marshall, the subject matter of economics includes all those activities of social man which promote material welfare. However, Robbins has given the priority to the alternative uses of limited means and included all human activities related to choices in its subject matter of economics.

2.    Basis of Economic Activities

Human beings have various wants. To fulfill their wants, they make efforts and effort lead to satisfaction as the subject matter of economics. In economics, the study of wants, efforts and satisfaction involves consumption, production, exchange, distribution and public finance.

• Consumption: It is the process of getting satisfaction by consuming goods and services
• Production: It is the process of creating economic activities
• Exchange: It is the link between product and consumption. Exchange refers to buying selling activities of the people into various markets
• Distribution: It is the allocation of national income to all factors of production, in proportion to their contribution
• Public finance: The process of obtaining income and spending it by the government is called public finance

3.    Modern Basis of Classification

• Microeconomics: It is that branch of economics that studies the small units of economics. It seems like the study of each particular tree of the whole forest. It is the study of an individual firm, household, industry, consumer etc.
• Macroeconomics: It is that branch of economics that studies the economy as a whole. It seems like the study of the whole forest, not an individual tree. It studies the aggregate variables such as total consumption, savings, national income, trade cycle.

Importance of Economics

Economics is a significant discipline of study. It has importance due to the subject matters it addresses and studies. More specifically, the importance of economics have been mentioned below:

• Economics teaches about the economic systems and their operating mechanisms
• Economics helps in understanding modern methods of production and investment
• It helps in developing necessary skills, knowledge and ability for preparation of business and national budget
• Economics teaches the ways to increase national wealth
• Different business and corporate laws can be framed around the understood concepts of economics
• It helps in understanding demand-supply forces for individuals and the economy as a whole
• Consumer behavior regarding choices and preferences can be easily understood by studying economics
• It clarifies the concepts of pricing and effective utilization of productive resources
• Fosters development of plans, strategies and policies for economic growth and development
• Understanding economic concepts help in solving the problems of poverty, income inequality, unemployment, inflation etc.