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ECONOMICS ?
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Chapter No 1
Introduction to Economics
Prepared By
Kokab Manzoor
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Chapter`s outlines
Some basic concepts of Economics
Definition of Economics
Scope of Economics
Economics is a science or an Art?
Branches of Economics
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Some basic concepts of economics
Goods
Services
Needs & Wants
Resources
Scarcity of Resources
Allocation of Resources
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Explanation of the given concepts
Goods.
All those tangible things which are used to
satisfy human needs and wants are called
goods.
Services.
All those economic actions which satisfy
human wants and needs and those are
done for money rewards are known as
services.
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CONT`D
Human needs. There are so many needs of human
beings but the most important are food, cloth and shelter
for the existence and survival of every human. These are
called basic needs.
Needs are divided into two kinds.
1. Economic needs. All those needs that are achieved and
satisfied with the help of money are known as economic
needs for example all goods and services.
2. Non-economic needs. Those needs which are
achieved free of cost are known as non-economic needs
for example oxygen, sun light, etc. These are gift of God
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CONT`D
Resources. Anything which generates revenue
is known as resource. such as land, man power,
machines, equipments, etc.
Scarcity. It means resources are limited to
satisfy unlimited wants.
Allocation. It is the process of selection of
needs & wants and how much resources to be
used to satisfy them.
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DEFINITION OF
ECONOMICS
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Professor Lionel Robins
Lionel Robins (1898 to 1984) was a
famous British economist. He was
Head of “London school of economics
UK”. He wrote a book “ Nature and
significance of economic sciences” in
1931, in which he defined economics
in terms of some realistic economic
problems of human beings.
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Robins` Definition
“ Economics is the science which studies
human behavior as a relationship between
multiple wants and limited means which have
alternative uses”.
This definition points out the problem of
scarcity and choice in the economic life of
people. There are three main points of his
definition which are given as under.
1. Multiple wants.
2. Limited means.
3. Alternative uses.
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Major points of Robins definition.
Multiple wants. Multiple wants mean there is no limit
of wants of human beings. Wants are unlimited and
some of them keep on rising again and again. This mean
they do not come to an end even if they are satisfied
once.
Limited resources
. There is no limit to human
wants, but the resources to satisfy these wants are
limited. So it is the situation when resources are not
enough to satisfy all the wants and needs.
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CONT`D
Alternative uses. The third point of definition is
alternative uses of limited resources. For example, a
person has money resource of 10000 Afs, with this
limited resource of money income he can purchase
various things. He can buy cloths, food, or can pay
utility bills, rents or can use it for entertainment etc.
In short we can say that as per Robins
“Economics is the science of choice”
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Conclusion
Economics is the social science that
deals with how society allocates its
resources among its unlimited wants
and needs.
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SUBJECT MATTER OF ECONOMICS
UNLIMITED WANTS
ECONOMIC ACTIVITIES
REWARD
ACQUISITION OF GOODS & SERVICES
SATISFACTION
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SUBJECT MATTER OF ECONOMICS
Unlimited Wants
Economic Activities
Satisfaction
(Land, Labor, capital, org.)
Acquisition of
Goods & services
Reward
(Rent, wages, Interest, profit)
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SUBJECT MATTER OF ECONOMICS
Explanation
We know that wants are unlimited. To satisfy
these wants we do some economic activity by
using four factors of production (land, labor,
capital and organization). As a result we get
reward in the form of rent, wages, interest and
profit. So with these reward we buy goods and
services and get satisfied. But still there are
some more wants to be satisfied. So the cycle
goes on. It is also known as Economic life cycle
of people.
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IS ECONOMICS SCIENCE
OR AN ART?
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SCIENCE
Collection of facts through observation or
experiments.
1 Positive Science
Facts collected and accepted, there is no
critical evaluation. E.g. Geography
2 Normative Science
Analysis of facts are made. How these facts
ought to happen. E.g. sociology, Psychology,
Political science etc.
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ART.
When the facts that are studied in a science
are followed in real life, it makes the science
an art.
For exp, a doctor studies science, but after
becoming doctor he puts his knowledge into
practice by attending patients.
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Economics Is A Science As Well As
An Art
When economics study the facts it is said to be
positive science, when suggestions are made to
change the facts to achieve the desired results, it is
said to be normative science. And when practical
steps are taken to put the suggestion in practice, we
see economics as an art.
For exp, Govt provides incentive to private sector to
boost production or
Labor economics etc.
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Branches of Economics
MICRO-ECONOMICS
Micro means millionth
part. In Micro Economics
we study the small part
of an economy. For
example the demand of a
single person or a firm,
consumption of a person
etc.
MACRO-ECONOMICS
Macro means large. In
Macro Economics we
study economy as a
whole. For exp we talk
about Aggregate demand
and aggregate supply,
inflation, consumption
function, foreign trade,
etc.
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