Economics

Economics is a social science. It deals with the production, allocation and consumption of goods and services. As a social science economic studies human behavior and activities and constructions and it uses scientific method to come to a conclusion.  Economics is science integrated to everyone’s life. We all are economists in our own ways. Our growing needs and their connection to the corresponding commodities in demand forms the very basis of economics in our daily life. Our ways of choosing a thing is what economics examines with many other associated activities. Before we discuss further about economics it is important to understand some fundamental concepts of the subjects. To understand economic we should first understand Scarcity, Micro Economics and Macro Economics.

Scarcity

Scarcity is a fundamental concept of economics. In simple words it means imbalance between the needs and resources available. Scarcity is a problem arising out of unlimited human needs and limited resources. These resources are inputs of production: Land, labor and capital. People have to make a choice among different items as the resources needed to fulfill all their wants are limited. It is nothing but giving up one want to satisfy other. An individual must make a choice as to what he or she is capable of buying and what he must leave. 

Example: A demand for fresh water is unlimited, while the resources for fresh wate is limited 

Micro Economics

Micro economics studies economics in a smaller scale. Micro economics deals with the interaction between individual buyer and sellers and the factors influencing the behavior of buyers and seller. It studies how individual, firms and households make decisions to allocate limited resources in the market. Therefore micro economics is more scientific in its approach and studies the parts forming the whole economy.  It studies how the supply and demand, behavior of both buyer and seller determines the price of a commodity. 

Macro Economics

Macro economics studies economics as a whole. It deals with the sum total of the economic activities including issues of growth, inflation, unemployment etc. It deals with the way nation allocates its resources.   However, it would be wrong to understand that macro economics is nothing but the sum total of micro economics. It studies the major elements of a large economy.

Primary themes of Economics

As mentioned in Principles of Economics section of Wiki books, there are several primary themes associated with the study of economics. These are mentioned below:

• Trade - buying and selling goods and services

• Models - simplistic situations to understand complex ones

• Happiness - people want to achieve the most happiness

• Choices - choosing the best allocation of resources

• Efficiency - maximizing production and profits

• Scarcity - the premise that people only have so much to work with

• Costs - "there is no free lunch"

• Money - who has money, access to it, how it is used, etc.

• Consumption - the buyers in the market who form the demand

• Production - the sellers in the market who form the supply

• Rationality - people doing things with good and logical reasoning

Meaning & Definitions of Economics

The Dictionary of Economics of defines economics as ‘The study of production, distribution and consumption of wealth human society.   The term economics is derived from the ancient Greek word oikonomia which means management of household, administration.   Oikonomia is a combination of two different Greek words Oikos and Nomos. Oikos means house and nomos means customer or law. So the meaning of the word economics is rules of the house. Some of the best definitions of economics are mentioned below:

Adam Smith:

- “Economics as a subject is an inquiry into the nature and causes of the wealth of nations. In particular economics is a branch of the science of a statesman or legislator [with the twofold objective of providing] a plentiful revenue or subsistence for the people to supply the state or commonwealth with a revenue for the public services.”

Wealth creation is the central point in Smith’s definition is. Smith identified wealth with welfare. Adam Smith assumed that, the wealthier a nation becomes the happier are its citizens. Thus, it is important to find out, how a nation can be wealthy. Economics is the subject that tells us how to make a nation wealthy. Adam Smith’s definition is a wealth-centred definition of Economics.

Alfred Marshall

- “Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man.”

Marshall, put supreme importance of man in the economic system. This definition is considered to be material-welfare centered definition of Economics. 

Lionel Robbins

- “Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses”. 

This definition is found in ‘Essays on the Nature and Significance of the Economic Science’, published in 1932. This definition is considered as most popular definition of economics.

Scope of Economics

The scope of economics is very wide. It is the science of scare resources in human society. However, in the present scenario is no longer a branch of social science that just deals with production and consumption. With the advancement of time and technology Economics as a subject also has undergone many impressive changes. There are now many branches of economics dealing with different issues of the economy ensuring maximum welfare of people and the society. The scope of the subject can best be understood with the help of its branches and function they do.

Micro Economics: As discussed earlier it is branch of economics that deals  with the interaction between individual buyer and sellers and the factors influencing the behavior of buyers and seller. It studies how individual, firms and households make decisions to allocate limited resources in the market.

Macro Economics: As discussed in the beginning of the essay Macro economics studies economics as a whole. It deals with the sum total of the economic activities including issues of growth, inflation, unemployment etc. It deals with the way nation allocates its resources. 

International Economics:  The importance of international economics is the field of study that deals with the economic relations among the countries. It is wide field of study of economics. This is an area of extreme importance for global economy.

Public Finance: The concept of public finance or fiscal economy emerged in global economy after the great depression of 1930. In this form of economy government plays a vital role in stabilizing the economic growth besides all other objectives. 

Development Economics: The Development economics emerged as a concept for the comparatively less developed countries of the world. There are many countries in the world that got freedom after the colonial after the World War II. Economy of these countries needed a separate treatment for the growth of their economy. This   approach or form of economy is known as development economy.

Health Economics: This is new branch of economics evaluating the importance of human development for economic growth of a nation. This branch of economics is slowly attracting the attention of global economists and nations. 

Environmental Economics: Environmental Economics is recognized as an important branch of economics.  Because of the challenging correlation between the development and environment this branch is getting momentum as an area of study.

Urban and Rural Economics: This branch of economics studies both rural and urban areas and their activities related to economics. Economist realized the need of this branch to give due importance to the economy of the both the sectors. The significance of the Urban and Rural Economics in present day scenario is extremely fruitful.

METHODOLOGY OF ECONOMICS

Economics is a social science and it deals mainly with the human behavior. It is not a pure science and cannot be studied the way other pure sciences like physics, chemistry are studied. Social science cannot be studied in laboratories and it is not easy to control the sphere of social sciences unlike the pure sciences. However, economics as a subject has its own defined, tested and proven methodologies which are used to conduct critical analysis of the economic relationship and economic predictions. The two broad methods used in the economic sciences are.

 The deductive method

 The inductive method

The deductive method

This method involves going from general to particular. Certain hypotheses or postulates regarding human behavior are taken to be true and then with the help of logical reasoning and examination, Nature and Scope of Economics 7 we try to figure out the cause and effect relationship between the factors under consideration. The following steps are involved in the deductive method.

 Firstly, a problem needs to be identified and then it should be properly specified for the study.

 The assumptions required in the study should be clear. Appropriate assumptions are crucial in economic analysis.

 After specifying the assumptions, hypotheses should be clearly framed. The hypothesis formulation requires likely relationship among the different economic variables.

 In the last phase, hypotheses should be tested through different tools like mathematical economics and econometrics.

 Based on the above analysis proper inference needs to be derived for specific economic decision making.

The Inductive Method

Although deductive method has strong points of merit to depend upon, this methodology seems to suffer from certain weaknesses. Therefore, economists belonging to the historical school and many other economists have favored the inductive or empirical method.

The method of induction involves going from particular to general. Here the appeal is to facts, rather than reasoning and an attempt is made to arrive at conclusions from the known facts of actual life. The inductive method required the following steps:

 The first step, as under the deductive method, is selecting and specifying the problem that is to be studied.

 The second step involves collection of data pertaining to the problem selected for study.

 The stage of collection is followed by classification and then analysis of the data by appropriate statistical techniques.

 The fourth stage is that of ‘inference’, i.e. drawing conclusions from the statistical analysis conducted. The conclusions are presented in the form of economic generalization.

Career in Economics

Economics is a subject that opens multiple doors for career opportunities. The knowledge of economics is in demand in almost all the areas of operations in government and private sectors.  The opportunities for employment for an economics student are broad in the true sense of the term. This can best be realized when we type the ‘economics’ in the search box of any job site and we get to a long and varied list of jobs available. It is because of the fact that an understanding of economics is must for any governmental or nongovernmental business or career. A person with a degree in economics can choose to work in any of the following areas:

 Government Organizations

 Non Government Organizations

 Private Organizations

The areas of opportunities available for an economics graduates in Government, Non-Government and Private sectors are mentioned below:

• Agricultural Economist

• Micro Economist

• Macro Economist

• Industrial Economist

• Building Economist

• Econometrician

• Economic Natural Resources Manager

• Economic and Financial Markets Reporter

• Finance Manager

• Graduate Quantitative Traders Assistant

• Health Economics Associate

• International Trade Analyst

• Market Analyst/Researcher

• Marketing Consultant

• Natural Resource Manager

• Relationship Manager

• Journalism, 

• Teaching in School/College/University 

• Foreign affairs 

• International consulting

• Economic Consultant

• Economic Researcher

• Economic Policy Maker

The knowledge of economics is always relevant to life, business and career. A student can choose either government sector or private sector and can plan his goal in the desired area in the field of economics. The job growth rate for economics is highest in the private sector and other sectors are speeding up steadily.