Nature and Scope of Economics Definition of Economics 1.Definition of the Classical School of Thought led by Adam Smith 2.Definition of the NEO Classical School of Thought led by Alfard Marshall 3.Definition of Economics given by Loinel Robbin

Adam Smith’s Definition of Economics “Economics is a science of wealth” 1.Production of wealth Land Labor Capital Organization 2.Exchange of wealth 3.Distribution of wealth 4.Consumption of wealth

Alfard Marshall’s definition of Economics “Economics is a science which studies human behavior in the ordinary business of life, it examine that part of individual and social action which is most closely connected with the attainment and the use of material requisites of well being” Main Points of the definition 1.Ordinary business of life 2.Analysis of economics activities 3.Attainment and use of material requisites 4.Well being or welfare of the society

Criticism on Marshall’s definition 1.It limits the scope of Economics 2.Material requisites which don’t promote welfare are excluded 3.Welfare is not measurable concept 4.Problems in policy making

Robbins Definition of Economics “Economics is a science which studies human behavior as a relationship between multiple ends and scare means which have alternative uses” Main points of the definition 1.Multiple ends 2.All wants are not equally important 3.Scarce Resources 4.Alternative use of resources

Merits of Robbin’s definition of Economics 1.Comprehensiveness 2.Extension of the scope of Economics 3.Analytical in Nature

Microeconomics vs Macro economics Micro -- study of how individuals make decisions and interact with others in society Macro -- study of aggregate behavior of the economy (inflation, unemployment, growth)

Basic Terms and Concepts in Economics Human Wants: 1.Non-economic wants 2.Economic wants Necessities Comforts Luxuries

Characteristics of Economic Wants Economic wants are: 1.Unlimited 2.Not equally important 3.Rise again and again 4.Can be satisfied by different means 5.Co-operate with each other 6.Satisfiable

Goods and Services Economic goods can be divided into two categories 1.Consumer Goods 2.Capital Goods Raw material Semi-manufactured goods Fully manufactured goods

Utility “utility is the power of a good or service by which it can satisfy a human want”

Characteristics of Utility 1.Utility depends or Human wants 2.It depends on use 3.It depends on knowledge 4.It depends on ownership 5.It depends on number 6.It depends on form 7.It depends on place 8.It depend on time and seasons