Introduction to Economics [Classical, Neo-Classical and Modern Definition]

Basic Introduction to economics.
- What is economics?
- Classical Definition
- Neo-classical Definition
- Modern Definition
- Subject matter of economics

1. INTRODUCTION TO ECONOMICS

2. What is economics? Economic activities So, In simple terms, economics of the study of economic activities of an economy. This Photo by Unknown Author is licensed under CC BY-SA

3. What is economics? Different economists have defined economics in different ways. So, there is no single definition of economics. The definition of economics is classified on three periods: Classical definition Neo-classical definition Modern definition

4. Classical definition of economics “Science of wealth” Adam Smith : Father of economics Published a book “ An enquiry into the nature and causes of wealth of nation” in 1770 AD. Defined economics as a science of wealth. The definition provided by him and his supporters and followers like JB Say, JS Mill, David Ricardo is called classical definition of economics. Adam Smith 1723-1790

5. Classical definition of economics “Economics maintains the relationship between the consumption and production of wealth.” “Prosperity of the individuals constitutes the prosperity of the nation.” “After acquiring wealth, the man can achieve his satisfaction” JB Say - “Economics is the study of the laws which govern wealth” JS Mill – “Economics is the science of wealth related to man.” Adam Smith 1723-1790

6. Neo-classical definition of economics Criticized the classical definition as “science of bread and butter”, “science of getting rich” Published a book “Principles of Economics” in 1890 AD and gave a new definition to economics. The definition of economics given by Alfred Marshall and his supporters like AC Pigou, Cannon, Beveridge is known was neo-classical definition of economics. Alfred Marshall 1842-1924

7. Neo-classical definition of economics “Political economy or economics is the 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 material requisites of well-being” Economics is the study of material welfare. “Man earns money to get material welfare.” “Wealth is not the end but only the mean.” Alfred Marshall 1842-1924

8. Modern definition of economics Criticized the neo-classical definition by saying that it was unscientific, and economics is a human science, not a social science. Published a book “ An essay on the nature and significance of economic science ” in 1932 A.D. The definition given by Lionel Robbins, Friedrich Hayek etc. is known as modern definition of economics. Lionel Robbins 1898-1984

9. Modern definition of economics “Economics is the science which studies human behaviors as a relationship between ends and scarce means which have alternative uses.” Human economic activities are moving around the problem of scarcity and choice. Economics is concerned with how people make choices about how to allocate limited resources to satisfy unlimited wants and needs. Lionel Robbins 1898-1984

10. Scope of economics The subjects that are covered in economics. Subject matter of economics Nature of economics Limitations of economics

11. Subject matter of economics Subject matter of economics means the matters that we study in economics. The subject matter of economics can be studied under two approaches: Traditional approach Modern approach

12. Subject matter of economics Based on traditional approach: On the basis of traditional approach, following subjects are studied in economics: Consumption Production Exchange Distribution Public finance

13. Subject matter of economics Consumption The process of getting satisfaction from different goods and services is called consumption.

14. Subject matter of economics Production The process of converting inputs into output. Or creation of utility using various factors of production is called production.

15. Subject matter of economics Exchange Activities related to buying and selling of goods and services is called exchange.

16. Subject matter of economics Distribution Allocation of national income to all factors of production according to their contribution is called distribution.

17. Subject matter of economics Public finance The study of government revenue, expenses, public debt is called public finance.

18. Subject matter of economics Based on modern approach: On the basis of modern approach, following subjects are studied in economics: Micro economics Macro economics

19. Subject matter of economics Micro Economics It is the branch of economics which studies individual or small units of an economy like individual demand, individual income etc.

20. Subject matter of economics Macro Economics It is the branch of economics which studies large aggregates and averages of the economy like national income, price level, employment, trade cycle etc.