Economics: Meaning And Basic Concepts Of Economics

Table of contents

1. Meaning of Economics
2. Nature and Scope of Economics
3. Basic concepts of Economics
4. Why we study economics
5. Branches of Economics
6. Other branches of Economics

Meaning of Economics

The subject economics has no specific definition. It has been defined in many ways by various economist as a social science which studies human beings and their behaviour. Some of the definitions given by some of the expert in the subject include the following:

Alfred Marshall define economics as a study of mankind in the ordinary business of life.

Adam Smith saw it as an enquiry into the nature and causes of wealth of Nations.

H.J Davenport looked at economics as a science that treats phenomena from the stand point of price.

However, the most generally accepted definition of economics is the one put forward by Professor Lionel C. Robins. Define economics as a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. This definition is all-embracing because it covers some major aspect of Economics such as scarcity, want, human behaviour and choice.

Nature And Scope of Economics

Economics belongs to a group of subject called social science. Other social science subject in class sociology, geography psychology government political science religious studies anthropology philosophy e t c.

Social sciences deal with various aspect of human behaviour. Economics is also concerned with human behaviour such as how people achieve their wants. Man interacts with people in the process of buying and selling. Economics as a social science subject is also concerned with the study of firms and companies and the government which is responsible for the provision of goods and services for its people in order to satisfy their wants.

Even though economics is often regarded as a science subject it does not assume the same level of precision and accuracy as any of the natural or pure or physical Sciences like chemistry physics and biology. This is because economics deals with human behaviour which is very complex and changing from time to time depending on circumstances.

Basic Concepts Of Economics

The basic concept or element of Economics are want, scarcity, scale of preference, choice and opportunity cost.

Wants:

Want may be defined as insatiable Desire or need by human beings to own goods or services that gives satisfaction. The basic needs of Man include food housing and clothing. Human lives are many. They include tangible goods Like Houses cars chairs television sets radio while The Others are in form of services example Tailoring carpentry medical.

Scarcity:

Scarcity is defined as the limited supply of resources which are used for the satisfaction of unlimited want. In other words scarcity is the inability of human beings to provide themselves with all the things the Desire or want. These resources are scarce relative to their demand.

Scale of preference:

Scale of preference is defined as a list of unsatisfied want arranged in order of their relative importance. In other words it was a list showing the order in which we want to satisfy our want arrange in order of priority. In the scale of preference the most pressing want comes first and the least pressing want comeslast. It is after the first in the least has been satisfied that there will be room for the satisfaction of the next.

Choice:

Choice can be defined as a system of selecting or choosing one out of a number of alternatives.

Human wants are meaning and we cannot satisfy all of them because of limited resources, we therefore decide which of the want we can satisfy first. Choice arises as a result of numerous human want and the scarcity of resources used in satisfying these wants. Choice therefore arises as a result of scarcity of resources.

Opportunity Cost:

Opportunity cost is defined as an expression of cost in terms of foregone alternative. It is a satisfaction of one’s want at the expense of another want. It refers to the want that are left Unsatisfied in order to satisfy another more pressing need. Human want are many why the means of satisfying them as cars or Limited. We are therefore faced with a problem where we have to choose one from a whole set of human want; to choose one means to forgo the other.

Why We Study Economics

We study the subject economics for the following reasons:

1. Allocation Of Resources: The study of Economics enables the government to allocate scarce resources to various sectors of the economy.

2. Development Of Programs: It also enables the government to develop certain programs that are beneficial to the people.

3. Rational Decision: Economics enables the individuals to choose certain want among the numerous needs using their scarce resources.

4. Preparation Of Budget: Economics assist the government to determine the expected income and expenditure of a country.

5. Solutions To Economics Problems: Economics also enables individuals firms and government to solve their problems using various principle of the subject.

6. Production: The study of Economics assist us to determine what to produce when to produce factors of production and how to produce goods and services required to satisfy human want.

7. Provision Of Basic Tools: The study of Economics provide basic tools for analysing economic problems among individuals firms and governments.

8. Maximization Of Profit: Economics enables Traders and businessmen to maximize their profit using economic principles in their business.

Branches Of Economics

Economics can be grouped into two major divisions. These are microeconomic and macroeconomics.

1. Microeconomics:

Micro economics papers to the branch of Economics which deals with smaller units or components of the economy. It is concerned with the analysis of the basic decision making components of household individual firms and government. It relates to cost output production pricing and marketing activities of household firms and government.

2. Macroeconomics:

Macroeconomics refers to the branch of Economics which deals with larger unit or aggregate of the economy. Macroeconomics relates to large aggregate such as national income inflation unemployment balance of payment. In summary microeconomics deals with the broad aggregate in the economy.

Other Branches Of Economics

1. Pure Economics: This is concerned with the study of laws and theories derived from the study of economic behaviour.

2. Applied Economics: This is concerned with the application of the laws and theories and analysing and solving economic problems.

3. Mathematical Economics: This is concerned with the collection and analysis of data as well as statistics.

4. Monetary Economics: This involves the study of money and banking.

5. Business Economics: Business economics is concerned with the study of thread business organisation and accounting.

6. Development Economics: This is concerned with the study of economic planning and national economies.