Meaning Of Economic Concepts SS1 Economics Lesson Note

DEFINITION AND MEANING OF ECONOMICS

Economics as a dynamic subject has very many definitions.  It is often said that there are so many definitions of economics as there are economists because they see the subject from different points of view.

Some definitions given by some economists include:

1. Adam Smith (18th Century British Economist and Called the Father of Economics) in 1776 defined economics as an inquiry into the nature and causes of the wealth of nations.
2. John Stuart Mill in 1843 defined economics as the practical science of production and distribution of wealth
3. Alfred Marshal in 1890 defined it as a study of mankind in the ordinary business of life, earning and enjoying a living.
4. H. J. Daven Port defines economics as a science that treats phenomena from the standpoint of price. 
5. Edvins Canon defines economics as the study of things having to do with man’s material welfare.
6. A.I. Pigou defines economics as the study of how total production could be increased so that the standard of living of people might be improved.

However, the most acceptable and widely used definition was by Professor Lionel C. Robins in 1932, which defines economics as the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. The reasons for the popularity of this definition are twofold, namely, it is the only definition which mentions:

1. The basic economic problem of scarcity and choice.
2. The fact that economics is a social science.

THE SCOPE OF ECONOMICS

Economics relies on the findings of other social sciences which include ethics, political science, sociology, geography, psychology, philosophy, anthropology,  etc, to reach sound conclusions concerning human behaviour. This inter-relationship with other social sciences promotes a wider general understanding of social behaviour.

Economics is a social science which studies human behaviour or mankind’s economic activities about the production, exchange, distribution and consumption of goods and services.

It deals with how people react to economic situations and how they behave while engaged in their daily economic activities.

Economics deals with the administration of scarce resources in the society.

Economics is positive in its study of human behaviour by concerning itself with What is, and not normative with What should be, and thus points out the full cost – the real or opportunity cost – of achieving our ends.

THE BRANCHES OF ECONOMICS

Economics is broken down into two main broad areas: Microeconomics and macroeconomics.

Microeconomics is the branch of economics that deals with economic action or behaviour of individuals, households and firms. It centres on the analysis of individual prices, markets and allocation of specific resources to particular uses e.g. demand and supply etc.

Macroeconomics on the other hand is the study of the economy as a whole including among other economic aspects such as inflation, National income, investment, unemployment, international trade etc.

WHY DO WE STUDY ECONOMICS

Economics as a social science, studies the  human behaviour of the individual, firm and government in the ordinary business of life due to the following reasons:

1. The study of economics provides the students with the basic skills for analyzing economic problems thereby preparing them better for positions where economic decisions are needed.
2. It enables a student to understand the nature of the complexity of economic activities.
3. It is useful in analyzing patterns of socio-economic behaviour.
4. It helps the government to promote growth and development thereby improving their standard of living.
5. It enables students to understand and appreciate various government policies where choices have to be made. 
6. The knowledge of economics is useful to understand the effects of the inequalities in the distribution of income and opportunity.
7. It is useful in the effective allocation of scarce resources to various sectors of the economy.

ECONOMICS AS A SOCIAL SCIENCE

Like other pure sciences, economics acquires knowledge (data) through systematic observation of facts, classifying the mass of data collected into their different relevant areas, using the facts collected for generalization of law, applying the formulated law to analyze new situations with a strong reliance on a certain assumption to enable the law to hold at all time. The assumption is, Ceteris Paribus meaning All things being equal. 

Economics is a social science subject and not an art or pure science due to the following reasons.

In pure sciences, such as Chemistry, Physics, and Biology, there are observations, selection and classification of relevant materials generalizations to formulate laws, but in economics, its fundamental facts are daily observation.

In pure sciences, observations from laboratory experiments are more precise and can be reproduced exactly, but in economics, they are attained from humans and cannot be exactly produced.

In physical sciences, theories are made from logical deductions but in economics, assumptions are made such as ceteris paribus meaning all other things are equal though they both use scientific methods.

Economic laws are based on probabilities while pure sciences have exact relationships.

Economics is a social science subject dealing with the behaviour of humans, which cannot be predicted.

Economics, therefore, deserves to be called a science subject because it makes use of scientific methods in its area of study. That is, it makes use of both deductive and inductive methods.

CAREER PROSPECT FOR STUDYING ECONOMICS

The study of economics leads to professionalism as it provides an individual with employment opportunities in any field or organization. An economist can fit in very well into any organization as long as resources are involved. The acquisition of knowledge of economics helps an individual to function effectively and efficiently in the following fields:

1. Lecturing in higher institution
2. Marketing
3. Banking
4. Managing an organization
5. Consultancy, etc