A Brief Introduction to Economics: Basic Concept and Definition
Basic Concept and Introduction
Whenever a baby born in this world he/she has needs so many things to survive in this world such as sunlight, water, air (oxygen), milk, food, clothings and shelter (housing) etc. some of these requirements are met freely (free of cost) like sunlight and oxygen etc because these are available in abundance. These type of wants are 'Non-economic Wants' in Economics. But, to meet some other requirements ( like milk, food, clothings and shelter (housing) etc) one has to pay something in exchange. One has to pay a price for these scarce resources in terms dollars (currency), other goods & resources (for barter or exchange) or may has to render some service in exchange. Thus these types of requirements or wants are called 'Economic Wants' in Economics. Therefore, the Economics studies that how the people meet their Economic Wants through managing these Scarce Resources.
Definition of Economics
As discussed earlier that Resources are scarce and a man has to pay something for meeting his/her needs to get these Scarce Resources. So, Economics studies that how a person manages the scarce resources to get maximum utility (satisfaction). Economics is Social Science Which Studies Human Economic Behavior. By human Economic Behavior, hereby, we mean the behavior of human beings which they adopt to fulfill their economics wants.
The Resources in this world are scarce so people have to make the rationale decisions (choices) to manage and utilize these scarce resources. So, Economics often termed as the science of scarcity and choice. One thing should also be made clear that the scarce resources have multiple (alternate) uses and man has to decide (make choice) about the optimal use of these resources. In context of 'Scarcity and Choice' Robins defines the term Economics as below,
"Economics is a Social Science which studies human behavior as a relationship between multiple ends and scarce resources which have alternate uses."
In this definitions three terms are used: (i) Multiple Ends i.e wants are unlimited, (ii) Scarce Resources i.e resources are scarce and (iii) Multiple Uses i.e. the resources have multiple uses.
Consequently, we can say that Economics studies human behavior that how he meet his/her unlimited wants and desires through managing his/her scarce resources and by making optimal choice about best use of the resources among their alternate uses. There the concept of preference is developed that to manage multiple wants from limited (scarce) resources he/she has to preferential about the choices. He/she may prefer his/her one want or desire over other then first he/she may fulfill his/her more preferred choice first because of the Scarcity of resources.
Introduction to Economics - Video Lecture
Economics is a Sience of Wealth
Another definition of Economics which is most commonly used is derived from concept of the Adam Smith(the Founder of Modern Economics) is,
"Economics is science of wealth which studies that how the wealth is produced, how it is consumed, for whom it is produced and how it is distributed."
According to this definition, Economics studies,
- Production of Wealth
- Consumption of Wealth
- Distribution of Wealth
Factors of Production
Here the concept of the 'factors of production' arises. There are four factors of productions i.e (i) Land (ii) Labor (iii) Capital & (iv) Entrepreneur (Managers). So, wealth is created (produced) using these four factors of productions and then distributed among these accordingly. The shares of above mentioned four factors are (i) Rent (ii) Wage (iii) Interest & (iv) Profit respectively. Nowadays the Technology is also also considered as a factor of production.
© 2012 Ghualm Mohey-ud-din