Introduction to Economics

Prof. Priyanka S Kadam

B.Com, MA (Eco), MBA (Fin)
People who brought economics to the forefront

• Kautilya – Arthashastra

• Adam Smith – An enquiry into the nature &

causes of wealth of nations

• Alfred Marshall – Principles of political economy

Meaning & subject matter
Economics is a social science. The branch of social science that deals
with the production and distribution and consumption of goods and
services and their management A science is a systematized body of
knowledge that establishes a cause and effect relationship.

The subject matter of economics is –

Wants Efforts Satisfaction

Scope of economics
• Scope refers to sphere, area, limitations or boundaries of subject.

1. The subject matter of economics is

Wants Efforts Satisfaction

i. a) Production b) Distribution c) Consumption

d) Exchange e) Public finance f)Growth
i. L
ii. Micro economics – study of individuals or a particular decision
making unit. It studies how a producer maximizes profits
iii.Macro economics – it is a study of aggregates and averages
2. Economics a science or an art –
Science is a systematic body of knowledge
Art is an application of the principles of science

3. Economics a positive or normative science –

A positive science is one which describes things as they are. It
describes the facts. It is descriptive in nature. Its aim is to
establish uniformities.
A normative science is one which describes the way things
should be. Its aim is to determine ideals and it is prescriptive in
nature.

4. Area of study –
Demand analysis, production & supply analysis, cost analysis,
pricing, linear programming, game theory, factor pricing, etc…

5. Relationship with other disciplines such as statistics &

mathematics, operations research
Various definitions of economics

1. Wealth definition

2. Welfare definition

3. Scarcity definition

4. Growth definition
 Wealth definition Welfare definition

• Classical • Neo – classical

• Adam Smith & J.S Smith • Prof. Alfred Marshall

• “ Economics is a study of • They wanted to give economics

wealth, how wealth is a dignified status
produced, distributed and
consumed by all ”. • “Economics is the study of
mankind in the ordinary
• Its main focus is on creation of business of life. It examines
wealth. that part of an individual &
social action which deals with
• Philosophers called it a dismal the use and attainment of
science material requisites of well
being”
 Scarcity definition Growth definition

• Modern • Latest

• Prof. Lionel Robbins • Prof. Paul A Samuelson

• “Economics s a study of • “Economics is a study of how

human behaviour as a men & society choose with or
relationship between scarce without the use of money to
means which have alternative employ scarce productive
uses”. resources which could have
alternative uses & to distribute
them over time for
consumption now & in the
future amongst people &
various groups of society”.