What is Economics? Everything you need to know

What is Economics? : We generally define Economics as “Economics is the social science which deals with the means of exchange and scarcity of resources in which consumer can maximises his satisfaction, producer can maximises his profit and Society can maximize their social welfare”.

The word Economics is derived from the ancient Greek word ‘oikonomia‘ which means the management of family or a household.

What is Economics?

There are some different definitions given by some great economist which we should know:

1) Smith’s Definition: ‘Adam Smith’ who is also known as the father of Economics he considered the economy as a study of wealth. Smith defined economics as “An inquiry into the nature and causes of the wealth of the nation’s”.

2) Marshall’s Definition: Many have agreed with ‘Alfred Marshall’ a leading 19th century English economist who said, economics is a study of mankind in the ordinary business of life. He considered the economy as the study of wealth and the study of mankind both.

Why we should study Economics?

Economics is studied because it enables us to understand different aspects of the economics.

The two reason for study of Economics can be classified as scarcity and economic problem.

(1) Scarcity: As we all know that human wants are unlimited with the resources are limited hence, economic is concerned with the selection of resources under the condition of scarcity. In addition to being scare resources also have alternate uses which means those can be put to more than one use.

For example:

(a) Land: Land can be used for many purposes like for growing crops, making factories, buildings, houses etc.

(b) Water: Water can be used for many purposes like in household chore, for making electricity, for irrigation etc. 

(2) Economic Problem: Any economic problem is basically a problem of choice like as we all know that there are limited resources with their alternative uses for the unlimited human wants, so we have to priorities or choose a commodity for one use and other valuable uses have to reject. So, basically economic problem is a problem of choice involving satisfaction of unlimited wants out of limited resources having alternative uses.

There are 3 main reasons for Economic Problem:

a) Scarcity of Resources

b) Unlimited Human Wants

c) Alternate Uses.

So learners, Till now we tried to cover the need of subject to study.

Now, we will try to learn about the two broad branches of Economics:- 

1) Micro Economics 

2) Macro Economics 

Let’s discuss these concepts in detail.

1. Micro Economics: In micro the letter i stands for individual that is, it studies the economic behaviour of individuals. Adam Smith is considered to be the founder of the field of micro. The term micro has been derived from the Greek word ‘mikros‘ which means small. Microeconomics is the part of economic theory which study the behaviour of individual units of an economy. For example: individual output or expenditure, individual income etc. 

It is mainly determined by the demand and supply i.e, the particular price of commodities determine by its supply and demand, that’s why it is also known as price theory.

2. Macro Economics: It is the part of economics which study the behaviour of aggregate of the economy as a whole. The term macros has been derived from the Greek word ‘makros‘ which means large and it deals with the overall performance of the economy. For example national income, aggregate consumption and it’s main tools are aggregate demand and aggregate supply in the market. It is concerned with study of problems of the economy like inflation, unemployment and poverty etc.

Both the approaches micro and macro are supplementary to each other the superiority of one approach over the other cannot be claimed.

So these are all about the basics of economics, in upcoming blogs we will discuss more about this subject in detail.