BBM 202 Lesson 1: Economics: Meaning, Nature, and Scope
____________________________________________________________________________
LESSON 1
MEANING, NATURE AND SCOPE OF ECONOMICS
______________________________________________
Structure of the Lesson:
1.1 Meaning and Definitions of Economics
1.2 Meaning of Microeconomics
1.3 Scarcity and Choice
1.4 Economic Problem
1.5 Nature of Economics
1.6 Positive Versus Normative Analysis
1.7 Subject Matter of Economics
1.8 Summary
1.9 Self check Questions
1.10 Suggested Readings
Objectives of the Lesson:
Objectives of this lesson are:
To explain the meaning and definitions of Economics, and
To discuss the key concepts of Economics like, Scarcity and Choice, Economic
Problem etc.
To explain the nature and scope of economics.
1.1 MEANING AND DEFINITIONS OF ECONOMICS
The word 'Economics' has been derived from two Greek words Oikos (meaning a
house) and Nemein (meaning to manage). Economics meant managing a household
with the limited funds available in the house in an economical manner. Alternatively,
economics is the study of how a society chooses to use its limited resources to produce
exchange and consume goods and services.
Economics has been defined by various economists. Various definitions are grouped
under four headings e.g.: Wealth definitions, Welfare definitions, Scarcity definitions,
and Growth and development definition.
Wealth Definitions: In wealth definitions given by classical economists , According to
Adam Smith (known as father of Economics, who wrote a book titled “An enquiry into
1
, BBM 202 Lesson 1: Economics: Meaning, Nature, and Scope
____________________________________________________________________________
the Nature and Causes of Wealth of Nations” in 1776) "Economics inquires into the
factors that determine wealth of the country and its growth." The definition emphasizes
production and expansion of wealth. J.B. Say said that "Economics is the science which
deals with wealth." F.A. Walker stated that "Economics is that part of knowledge which
relates to wealth."
In short Wealth definitions considered production, distribution and exchange of wealth.
So, contemporary writers termed economics as a dark and dismal science which is
concerned only with attaining material wealth. The non-material things such as health,
education, good administration were not covered by the wealth definitions. Thus, wealth
definition narrows down the scope of economics
Welfare Definitions: Alfred Marshall was the first economist who shifted (in 1890) the
emphasis from wealth to welfare in the definition of economics. According to him
"Economics is on one side the study of wealth; and on the other and more important
side, the study of man". He defines economics as "a study of mankind in the ordinary
business of life; it examines that part of individual and social action which is more
closely connected with the attainment and use of material requisites of well-being."
AC Pigou stated that "The range of our enquiry becomes restricted to that part of social
welfare that can be brought directly or indirectly into relation with the measuring rod of
money." According to Cannon “The aim of political economy is the explanation of the
general causes on which the material welfare of human being depends.”
Welfare definitions make clear some understanding of the factors that affect material
welfare. Accordingly, Economics is the study of income earning and income spending
activities of a society in daily life that promotes material welfare of human beings. Thus,
these definitions make economics both a social and normative science.
However, welfare definitions are criticized by other economists on the grounds that
welfare definitions ignored immaterial things. Further, Marshall defines economics in its
normative of negative aspect, i.e., what ought to be. For instance, Marshall's definition
excludes production of guns, cigarettes, opium, wine, poison, etc., from the subject
matter of economics because they do not promote human welfare. According to
2
____________________________________________________________________________
LESSON 1
MEANING, NATURE AND SCOPE OF ECONOMICS
______________________________________________
Structure of the Lesson:
1.1 Meaning and Definitions of Economics
1.2 Meaning of Microeconomics
1.3 Scarcity and Choice
1.4 Economic Problem
1.5 Nature of Economics
1.6 Positive Versus Normative Analysis
1.7 Subject Matter of Economics
1.8 Summary
1.9 Self check Questions
1.10 Suggested Readings
Objectives of the Lesson:
Objectives of this lesson are:
To explain the meaning and definitions of Economics, and
To discuss the key concepts of Economics like, Scarcity and Choice, Economic
Problem etc.
To explain the nature and scope of economics.
1.1 MEANING AND DEFINITIONS OF ECONOMICS
The word 'Economics' has been derived from two Greek words Oikos (meaning a
house) and Nemein (meaning to manage). Economics meant managing a household
with the limited funds available in the house in an economical manner. Alternatively,
economics is the study of how a society chooses to use its limited resources to produce
exchange and consume goods and services.
Economics has been defined by various economists. Various definitions are grouped
under four headings e.g.: Wealth definitions, Welfare definitions, Scarcity definitions,
and Growth and development definition.
Wealth Definitions: In wealth definitions given by classical economists , According to
Adam Smith (known as father of Economics, who wrote a book titled “An enquiry into
1
, BBM 202 Lesson 1: Economics: Meaning, Nature, and Scope
____________________________________________________________________________
the Nature and Causes of Wealth of Nations” in 1776) "Economics inquires into the
factors that determine wealth of the country and its growth." The definition emphasizes
production and expansion of wealth. J.B. Say said that "Economics is the science which
deals with wealth." F.A. Walker stated that "Economics is that part of knowledge which
relates to wealth."
In short Wealth definitions considered production, distribution and exchange of wealth.
So, contemporary writers termed economics as a dark and dismal science which is
concerned only with attaining material wealth. The non-material things such as health,
education, good administration were not covered by the wealth definitions. Thus, wealth
definition narrows down the scope of economics
Welfare Definitions: Alfred Marshall was the first economist who shifted (in 1890) the
emphasis from wealth to welfare in the definition of economics. According to him
"Economics is on one side the study of wealth; and on the other and more important
side, the study of man". He defines economics as "a study of mankind in the ordinary
business of life; it examines that part of individual and social action which is more
closely connected with the attainment and use of material requisites of well-being."
AC Pigou stated that "The range of our enquiry becomes restricted to that part of social
welfare that can be brought directly or indirectly into relation with the measuring rod of
money." According to Cannon “The aim of political economy is the explanation of the
general causes on which the material welfare of human being depends.”
Welfare definitions make clear some understanding of the factors that affect material
welfare. Accordingly, Economics is the study of income earning and income spending
activities of a society in daily life that promotes material welfare of human beings. Thus,
these definitions make economics both a social and normative science.
However, welfare definitions are criticized by other economists on the grounds that
welfare definitions ignored immaterial things. Further, Marshall defines economics in its
normative of negative aspect, i.e., what ought to be. For instance, Marshall's definition
excludes production of guns, cigarettes, opium, wine, poison, etc., from the subject
matter of economics because they do not promote human welfare. According to
2
