Introduction to Economics

The term Economics was originally derived from the two Greek word Oiks which means household and Nemein which means management. Economics as a subject emerged scientifically in the year 1776, when Adam Smith for the first time in his book Wealth of Nations defined economics as a social science. Due to this, he is regarded the father of economics. Indian statesman, Kautilya used the term both for political and economic activities. His Arthashastra was considered to be a combination of Economics, Political science and Jurisprudence. Economics emerged as a separate discipline for the first time in the writings of classical economists. However, it was Dr.Alfred Marshall, who in 1890 used the term economics for the first time is his famous book, named Principles of Economics.

Introduction to Economics

Definitions of Economics
Nature & Scope of Economics

Branches of Economics

Definitions of Economics
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Wealth Oriented Definition By Adam Smith Welfare Oriented Definition By Alfred Marshall Scarcity Oriented Definition By Lionel Robbins Growth Oriented Definition By Samuelson

Wealth Oriented Definition

Adam Smith An enquiry into the Nature and Causes of Wealth of Nations. Main points: science of wealth Wealth means material wealth Neglect of immaterial services restricts scope of economics Man put to a secondary place

Wealth Oriented Definition

Criticism - Ignores higher values of life - Defined wealth in a narrow & restricted sense. - Ignored human welfare

Welfare Oriented Definition

Alfred Marshall Political Economy or economics is the study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being.

Welfare Oriented Definition

Main points - Study of mankind - Economics studies mans life in the ordinary business of life - Primary object of economics is promotion of material welfare

Welfare Oriented Definition

Criticism - Economics is a human science - Difficult to measure welfare - Difference between economic & noneconomic activities is invalid

Scarcity Oriented Definition

Lionel Robbins Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. Main points - Unlimited wants - Limited means - Alternative uses of means - Choice

Scarcity Oriented Definition

Criticism - Self-contradictory - Macro aspect of economics ignored - Problems of abundance ignored - Not applicable to Socialist countries - Treats economics as science only

Growth Oriented Definition

Professor Paul Samuelson Economics is the study of how people and society end up choosing with or without the use of money, to employ scarce productive resources that could have alternative uses, to produce various commodities and distribute them for consumption, now or in the future, among various persons and groups in society. It analyses the costs and benefits of improving patterns of resource allocation.

Growth Oriented Definition

Main points - Efficient allocation of resources - Growth of resources over time is considered - Dynamic approach - Universal nature of economic problems

Nature & Scope of Economics

It includes : The Subject matter of Economics Whether Economics is a Science or an art Whether it is a positive science or normative science Whether it is a social science Welfare economics

Subject matter of Economics

Economic problems can be analyzed or studied in two ways at an individual level-Microeconomics (Price Theory) at aggregate level-Macroeconomics (Income Theory)

Whether Economics is a Science or an Art

Science implies- cause and effect relationship between various economic variables. - a systematized body of knowledge and not merely a collection of facts. - It has laws which explain and elucidate the facts.

Whether Economics is a Science or an Art

-it teaches us how to do things -It is practical - it gives us basic values with which we can solve various economic problems Conclusion: Economics is both a science and an art. As a science, it is a systematic body of knowledge and it makes generalizations and theories using scientific methods. As an art, its puts this knowledge into practice and uses the economic rules for formulation of various economic policies.

Whether Economics is a Science or an Art

Samuelson has rightly stated that economics can be described as the oldest of the arts and the newest of the sciences indeed the queen of social sciences.

Whether it is a positive science or normative science

Positive science: - Explains what is Normative science: - Explains what ought to be Conclusion: Economics is both a positive and a normative science

Whether it is a social science

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Economics is a study of man Economics studies social behaviour

Welfare economics
Economics has mainly concerned itself with welfare, i.e. maximization of total satisfaction with the given scarce resources. An individuals welfare may relate to his physical, economic or spiritual wellbeing. Economics is only concerned with that part of an individuals well being which is derived from economic goods and services. A persons choice is determined by a large number of variables some of which are economic and others are not. Social welfare has been defined as , an aggregate of the utilities or satisfaction of all the individuals in the society.