Meaning of Economic Concepts – SS1 Economics Lesson Note (First Term)

Economics is the social science that studies human behaviour as a relationship between ends and scarce means which have alternative uses.

Behavioural objectives

By the end of the lesson, students should be able to:

1. Define economics using the views of at least three economists, including Lionel Robbins.
2. State the scope of economics.
3. Distinguish between microeconomics and macroeconomics.
4. Give reasons for studying economics.
5. Explain why economics is a social science and not a pure science.
6. List career opportunities for people who study economics.

What is economics?

Economics is the study of how people use scarce resources to satisfy their unlimited wants.

• Main concern: production, exchange, distribution and consumption of goods and services.
• Branches: microeconomics and macroeconomics.
• Why many definitions exist: economists see the subject from different points of view.

What are the definitions of economics by some economists?

Economists have defined economics in at least six well-known ways.

Which definition of economics is the most acceptable?

The most acceptable definition is that of Professor Lionel C. Robbins in 1932: economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.

• Ends: the many wants people try to satisfy.
• Scarce means: resources such as land, labour, capital and time, which are limited.
• Alternative uses: one resource can serve more than one purpose, so people must choose.

The definition is popular for these reasons:

1. It points to the basic economic problem of scarcity and choice.
2. It treats economics as a science of human behaviour, which makes it a social science.

What are the basic economic concepts?

Basic economic concepts are the key terms used to explain how people deal with scarcity.

• Wants: the goods and services people desire, which are unlimited.
• Resources: the land, labour, capital and enterprise used to produce goods and services.
• Scarcity: the shortage of resources compared with the wants they are meant to satisfy.
• Choice: selecting some wants to satisfy because not all can be met.
• Scale of preference: a list of wants arranged in order of importance.
• Opportunity cost: the next best alternative given up when a choice is made.

Example: if a student spends the last ₦500 on a textbook instead of a snack, the snack is the opportunity cost.

What is the scope of economics?

The scope of economics is the area of human activity that economics covers.

• Economic activities: production, exchange, distribution and consumption of goods and services.
• Human behaviour: how people react to economic situations in their daily work and trade.
• Scarce resources: how scarce resources are managed in society.
• Link with other social sciences: economics uses findings from ethics, political science, sociology, geography, psychology, philosophy and anthropology.

This link with other social sciences gives a wider understanding of social behaviour.

What is the difference between positive and normative economics?

Positive economics deals with what is. Normative economics deals with what ought to be.

• Economics is mainly positive in its study of human behaviour.
• It also points out the full cost (the real or opportunity cost) of achieving our ends.

What are the branches of economics?

There are two main branches of economics: microeconomics and macroeconomics.

What is microeconomics?

Microeconomics is the branch of economics that studies the behaviour of individuals, households and firms.

• Focus: individual prices, markets and the use of specific resources.
• Examples: demand and supply, the price of garri, a firm’s output.

What is macroeconomics?

Macroeconomics is the study of the economy as a whole.

• Focus: inflation, national income, investment, unemployment and international trade.
• Examples: the national unemployment rate, the general price level.

What is the difference between microeconomics and macroeconomics?

Why do we study economics?

We study economics to understand how individuals, firms and governments make decisions in the ordinary business of life.

1. It gives students the basic skills for analysing economic problems, so they are better prepared for positions where economic decisions are needed.
2. It helps a student to understand the complexity of economic activities.
3. It is useful in analysing patterns of socio-economic behaviour.
4. It helps the government to promote growth and development, and so improve the standard of living.
5. It helps students to understand government policies where choices have to be made.
6. It helps us to understand the effects of inequalities in the distribution of income and opportunity.
7. It is useful in the effective allocation of scarce resources to the various sectors of the economy.

Why is economics a social science?

Economics is a social science because it studies human behaviour using scientific methods, but its results are less exact than those of the pure sciences.

How does economics use the scientific method?

1. Collect data through systematic observation of facts.
2. Classify the data into relevant areas.
3. Use the facts to formulate laws.
4. Apply the laws to analyse new situations.

To make a law hold at all times, economics relies on the assumption ceteris paribus, meaning “all other things being equal”.

Example: the price of garri falls, so people buy more, if income and taste stay the same.

How does economics differ from the pure sciences?

• Human behaviour cannot be predicted with certainty.
• Economics still counts as a science because it uses both deductive and inductive methods.

What are the career prospects for studying economics?

Studying economics gives a person skills that fit into any organisation that uses resources.

• Lecturing: teaching in higher institutions.
• Marketing: studying markets and customers for a business.
• Banking: working in banks and other financial institutions.
• Management: managing an organisation.
• Consultancy: advising firms and governments on economic matters.
• Government service: planning and policy work in ministries and agencies.

Evaluation

1. State the definition of economics given by Lionel Robbins in 1932.
2. Give two reasons why the Robbins definition is the most widely accepted.
3. Distinguish between microeconomics and macroeconomics, with one example of each.
4. State four reasons for studying economics.
5. Give two reasons why economics is a social science and not a pure science.

Assignment

Explain the meaning of ceteris paribus with one example, and list five fields in which a student of economics can work.