Definitions, Scope, Importance And Methodology Of Economics - SS1 Economics Lesson Note
Definition of Economics
The word "economics" is derived from the Greek words "oikos" (meaning "household") and "nomos" (meaning "rules" or "management"). So, the term "economics" originally referred to the management of household affairs, including production, consumption, and distribution of goods and services.
Lionel Robbins defined economics as "the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses." In simpler terms, economics is the study of how people use limited resources (such as money, time, and natural resources) to satisfy their unlimited wants and needs.
It explores the choices people make when faced with scarcity and how these choices affect the allocation of resources in society. Economics is concerned with how individuals, firms, and governments make decisions about how to allocate scarce resources to satisfy their wants and needs.
Scope of Economics
The scope of economics is broad and encompasses a wide range of topics related to the production, consumption, distribution, and exchange of goods and services. The scope of economics includes the following areas:
• Microeconomics: Microeconomics is the study of how individuals, households, and firms make decisions about how to allocate their resources in the most efficient way. It studies concepts such as demand, supply, production and income distribution.
• Macroeconomics: Macroeconomics is the study of how economies grow and develop over time. It studies the behaviour of the overall economy, including aggregate measures such as gross domestic product, inflation, and unemployment.
• International Economics: International economics is the study of how countries trade with each other and how international institutions such as the World Trade Organization and the International Monetary Fund affect international trade and finance.
• Development Economics: Development economics is the study of how low-income countries can grow and develop economically and reduce poverty.
• Environmental Economics: Environmental economics is the study of how economic activities affect the environment and how environmental policies can be designed to promote sustainable development.
Importance of Economics:
• Economics is important because it provides tools and models to study how societies allocate scarce resources like labor, capital, and natural resources, and how they make decisions about what to produce, how to produce, and for whom to produce.
• Economics is useful for businesses, policymakers, and consumers to make informed decisions about buying and selling goods and services.
• Economics is used in policy-making, with the goal of promoting economic growth, reducing inequality, and achieving other social objectives.
• Economics is important for understanding international trade and finance.
• Economics provides tools to evaluate the benefits and costs of environmental policies and to manage natural resources sustainably.
• Economics is useful for managing personal finances and can help individuals make informed decisions about saving, investing, and spending money.
Methodology of Economics:
The methodology of economics involves the use of theoretical models and empirical methods to analyze economic phenomena. Theoretical models use assumptions and logical reasoning to explain economic behaviour, while empirical methods use data and statistical analysis to test and validate these models. Economics also incorporates insights from fields such as psychology, sociology, and political sciences.