The word Economics comes from two Greek words – ‘eco’ meaning home, and ‘nomos’ meaning accounts. Over a period of time there have been many definitions of Economics. Initially economics was known as the science of wealth. It later came to be known as the study of general methods by which men achieve their material needs. To understand the meaning of economics, we must first understand the problem of wants and scarcity of resources.
A society is made up of humans and humans needs several goods and services in their lives. The desire to obtain these goods and services is known as Wants. It is known that humans have unlimited wants. For example, if a person has just bought a house for himself, he is not satisfied with that and wants a car after that, and after getting a car he wants a bigger car and a bigger house and appliances for his house and clothing and so on……
Not only are the wants of humans unlimited, but they also differ in priority. For every individual, some wants are more necessary than others. For example, for a person who is below the poverty line, wants like food and shelter are more important than want for a mobile phone.
Scarcity of Resources in Economics
Certain resources are required to produce goods and services which satisfy human wants. These resources, are available in limited quantity and each such resource also has several alternate uses. Therefore, to satisfy unlimited wants there are limited amount of resources which also have alternative uses. For example, petrol is used not only in vehicles but also for running machines, generators etc. Thus the problem of scarcity of resources arises.
Economics is all about making choices to use goods and services to satisfy wants, with scarce resources. Economics studies the human behavior as a relationship between means i.e. resources, and ends i.e. human wants. Economics aims to make sure that the limited resources are optimally utilized in the best possible manner.
In other words, Economics is a social science concerned with proper use and allocation of resources for the achievement and maintenance of growth stability.
Economics can also be defined as the social science concerned with the production, consumption and distribution of goods and services.
It is the field of science that studies how businesses, firms, individuals, governments and nations make choices on allocation of their limited resources in order to satisfy their unlimited wants and needs. Economics studies the process of production of goods and services their distribution in the market and finally their consumption by the consumer.
Taking these explanations of the meaning of economics into consideration, economics can be defined as follows –
Economics is a social science which studies the way a society chooses to use its limited resources, which have alternate uses, to produce goods and services and to distribute them among different groups of people.
“Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man.” – Alfred Marshall
“Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” – Lionel Robbins
Microeconomics Class 12 Notes – Chapter 1