Introduction to Economics

Nature, Scope and Methodology of Economics To study the Nature, Scope and Methodology of Economics it is first essential to know the definition of Economics as the main object of defining Economics is to point out what Economics is and what it is not, as it should give a complete and clear picture of the subject matter of Economics, numerous and varied are the definitions of economics; EARLY DEFINITION Adam Smith who is considered the father of Economics defined the term Economics as; a Science of Wealth Economics was considered to teach selfishness and came to be called a Dismal (Depressing) Science

MARSHALLS DEFINITION Luckily Economics was soon rescued from being a Dismal science towards the wellbeing of human welfare as Marshall defines Economics; as a study of mankind in the ordinary business of life as it enquires how he gets his income and how he uses it. Thus it is on one side a study of wealth and on the other and more important side, a part of the study of man. In other words it is a link between wealth and welfare. ROBINS DEFINITION According to Robin; Economics studies human behaviour as a relationship between ends and scarce which have alternative uses This definition is based on three fundamental propositions. The ends are unlimited The means to achieve those ends are limited These means are capable of alternative uses

MODERN DEFINITION For a long time Robbins definition was generally considered to be satisfactory and adequate. But recent development in economics during the last four decades especially the emergence of Keynesian theory of income and employment determination and of the economics of growth have necessitated a new definition of Economics which is; Is a Social Science concerned with the proper uses for the achievement and maintenance of growth and stability and with determinants of income and employment What then is Economics? Over the past 30 years the study of economics has expanded to include a vast range of topics which are; Studies how the price of labor, capital and land are set in the economy and how these prices are used to allocate resources. Explores the behaviour of financial markets. Examines the distribution of income. Looks at the government spending Studies the rate of unemployment Examines the pattern of trade with other nations Looks at growth with developing countries

SCOPE OF ECONOMICS Different authors and Economists have given their views about economics in discussing the scope of economics we would be talking about the subject matter as well as whether Economics is a Science or Art and whether it can pass moral judgments and finally its branches.

Subject Matter We may say that Economics is a study of mans actions in relation to wealth, as it studies how man consumes wealth, produces wealth and how wealth is exchanged and distributed in the community. It is also necessary to emphasize that economics does not study human beings as individual as for example Physiology and Psychology studies them on the other hand it studies them as members of society, influencing other people in society, thus we can come to this conclusion and say that Economics is a Social Science. Science or Art There is a controversy in Economics as to whether it may be called a Science or Art. The English Classical School of Economics were of the view that it was a Science, as its function is merely to explain the Cause and effects. But Economists in USA and Europe emphasized on the art side of economics as they suggested it to have a theoretical view of factors, thus keeping in mind of the above stated facts we can come up with a solution and say that Economics is both a Science and an art. English Classical School of Economics were of the view that it was a Science, as its function is merely to explain the

Cause and effects. But Economists in USA and Europe emphasized on the art side of economics as they suggested it to have a theoretical view of factors, thus keeping in mind of the above stated facts we can come up with a solution and say that Economics is both a Science and an art.

Another controversial point is whether Economics should be neutral or pass moral judgments; POSITIVE ECONOMICS An approach to economics that seeks to understand behaviour and the operation of systems without making judgements. It describes what exists and how it works. NORMATIVE ECONOMICS An approach to economics that analyzes outcomes of economic behaviour, evaluates them as good or bad and may prescribe courses of action. DESCRIPTIVE ECONOMICS The compilation of data that describes phenomena and facts Thus we can come to this conclusion by saying Economics is Positive, Normative and a Descriptive Science.

Positive, Normative or Descriptive Judgments OR Methods of Economics

BRANCHES OF ECONOMICS
They are basically two branches of Economics; Microeconomics Macroeconomics Microeconomics The branch of economics that examines the functioning of individual industries and the behaviour of individual decision making units i.e. business firms and households. Macroeconomics The branch of economics that examines the economic behaviour of aggregates income, employment, output on a national scale.

Group Study
Answer the following questions while discussing them amongst your group members? Q. How does economics helps in the following;

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