Economics is the study of scarcity, resource utilization, and response to incentives, or the study of decision-making.

Economics is a vast subject and its definition and meaning have undergone changes over a period of time.

Aristotle, the Greek Philosopher has termed Economics as a science of ‘household management.’

There are two branches of economics: microeconomics and macroeconomics which are discussed below.

Meaning

Meaning of Economics

Due to its vastness, the meaning of economics has changed over the course of time. Let us see the evolution of the meaning of economics from the late eighteenth century.

SCIENCE OF WEALTH

The late eighteenth-century classical thinkers viewed that economics deals with the phenomenon of wealth.

This includes the nature and causes of wealth and the creation of wealth by individuals and nations.

SCIENCE OF WELFARE

In the early nineteenth century, scholars felt that economics should address the welfare of the society as only wealth divided the society into rich and poor.

Welfare is both quantitative and qualitative. The quantitative aspects involve consumption of goods and services, increase in per capita income etc.

SCIENCE OF SCARCITY AND CHOICE

The welfare definition only explains the material goods aspects of welfare and not the non-material services aspects.

Since resources available in society to individuals are scarce, we try to achieve our goals by alternatively using resources and using them appropriately.

For instance, consider an example where cloth and wheat are produced with fixed limited resources.

When the demand for Wheat is increased either we ignore the demand and produce the same quantities of cloth and wheat or allocate more resources to wheat production by cutting from cloth production to meet the demand.

SCIENCE OF GROWTH AND DEVELOPMENT

In the twentieth century, the role of government to ensure the growth and development of the entire economy gained momentum.

Therefore economics was no longer limited to individual decision-making and use of resources but included production and consumption of commodities over time.

It is well acknowledged that in order for an individual to be able to fulfil his or her desires, the entire economy must grow and appropriate mechanisms must be found to transfer the advantages of growth among individual residents.

As a result, the economy’s performance is critical in terms of resource utilization, production, and distribution of products and services.

The economy must distribute its resources across numerous alternative activities, assure their efficient utilization, and figure out how to grow them for future economic development.

SCIENCE OF SUSTAINABLE DEVELOPMENT

In the late twentieth century, economists talked about the welfare of future generations and the protection of the environment.

To achieve high growth and development the natural environment is exploited.

Increased consumption leads to wastage and it should be noted that many minerals are available in limited quantities which we may not leave behind for future generations.

It is our moral obligation to use the limited resources available wisely and efficiently in order to secure the well-being of future generations.

Nobel Laureate Prof. Samuelson has spelt out Economics as follows: “Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time, and distribute them for consumption now and in the future among various people and groups of society”.

Sustainable Development

Sustainable development refers to the development that meets current needs without compromising the ability of future generations to meet their own.

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