Unit 1 definition of economics of BALLBdf

Definition of economics

1. Economics I
BALLB, First Semester Full Marks: 100
Course Code: Eco 428 Pass Marks: 50
Credit: 3 Nature: Compulsory
By:
Krishna Kumar Regmi

2. Course Objectives
•Theobjectivesofthecourseare:·
•Toacquaintstudentswiththebasicconceptandknowledgeof
contemporaryeconomictheory,principlesandpracticesbothat
microandmacrolevels·
•Toprovidestudentsfamiliaritywitheconomicterminologies,words
andphrases·
•ToidentifyNepal'sownnatural,physicalandhumanresourcesandits
potentials·
•TooverviewtheprocessofbudgetandplanformulationinNepal

3. Unit 1: Principles of Economics (12 hrs)
1.1 Definition -Adam Smith, Marshall, and Robbins
1.2 Scope: Subject Matter and Nature of Economics
1.3 Approaches of Economics: Micro, Macro and Interdependence
1.4 Basic Economic Issues: Scarcity and Choice; and Economic Problems
1.5 Production Possibility Curve

4. Unit 2: Theory of Demand and Supply (10
hrs)
2.1 Theory of Demand: Meaning, Determinants, Law of Demand,
Movement and Shift in Demand Curve
2.2 Theory of Supply: Meaning, Determinants, Law of Supply,
Movement and Shift in Supply Curve
2.3 Determination of Equilibrium Price and Quantity
2.4 Change in Demand and Supply, and Effects in Equilibrium Price and
Quantity
2.5 Concepts of Utility: Meaning and Types; Cardinal Utility Approach
and Ordinal Utility Approach: Meaning, Assumptions and Differences

5. Unit 3: Cost, Revenue and Product Pricing (8
hrs)
3.1 Concepts of Cost: Explicit and Implicit, Accounting and Opportunity
and Economic Cost
3.2 Revenue and its Nature in Different Markets
3.3 Different forms of Market: Perfect Competition, Monopoly,
Monopolistic Competition and Oligopoly (Meaning, Features, Price and
Output Determination)

6. Unit 4: Economic Development (10 hrs)
4.1 Meaning and Concept of Economic Growth and Economic Development
4.2 Indicators of Economic Development
4.3 Basic Characteristics and Problems of Developing Countries
4.4 Approaches to Development: Liner Stages Theory, Structural Change
Model, and Theory of Economic Dependency
4.5 Issues in Development
4.5.1 Poverty: Meaning, Types and Policies of Poverty Reduction
4.5.2 Income Distribution and Inequalities: Meaning, Causes and Measurement
4.5.3 Unemployment: Meaning, Dimensions
4.5.4 Co-operative Societies: Meaning, Types and Importance

7. Unit 5: Nepalese Economics (8 hrs)
5.1 Characteristics/Features of Nepalese Economy
5.2 Potentials of Nepalese Economy: Water, Energy, Forest, Minerals,
Human Resources, Agriculture and Biodiversity
5.3 Planning in Nepal: Meaning, Importance, Process ofPlan
Formulation, Overview of Past Plans
5.4 Current Plan: Objectives, Strategies, Programmesand Resource
Allocation
5.5 Budget in Nepal: Meaning, Process of Budget Formulation,
Challenges and Major Constraints

8. Reading Materials
•Dwivedi, D.N. (2003). Microeconomics Theory and Applications. New Delhi:
Pearson Education Pvt.Ltd.
•Gautam, S. and SurendraLamsal. (2011). Microeconomics. Kathmandu:
Sunrise Publications Pvt. Ltd.
•Jhingan, M.L. (2010). The Economics of Development and Planning. New
Delhi: VrindaPublication Pvt. Itd.
•Kandel, N. and et. al. (2015). Text Book of Economics. Kathmandu: Buddha
Academic Publishers and Distributers Pvt. Ltd.
•Samuelson, P. A. and W. D. Nordhaus. (2009). Economics. New Delhi: Tata
McGraw Hill Publishing Company.
•Todaro, M.P. (1993). Economic Development in the Third Word. Hyderabad,
India: Orient LongmanLtd.

9. Definition of Economics
1. Adam Smith’s Definition
•Classical Economist Adam Smith had given the wealth definition in
1776 A.D.
•He was a citizen of Scotland.
•He has separated from other social science and defined Economics for
the first time. So, everyone know him as the‘Father ofEconomics’as
well as the leader of Economics.
•He is responsible for the birth of the modern school of Economics
which name wasClassical Economics. He published his book‘An
Inquiry into the Nature and Causes of Wealth of Nations’or‘Wealth
of Nation’.

10. 1. Adam Smith’s Definition
•According to Adam Smith, “Economics is the science of wealth”. In
other words, Economics is the study of earning and spending of
wealth; ways, and means of increasing wealth of a nation.
•Many Classical Economists like J.B. Say, T.R. Malthus, DevidRicardo,
J.S Mill, F.A. Walker, etc. supported this definition.

11. Key Features of Smith's Economic Thought:
1.Economic Man: Smith introduced the concept of self-interested rational
individuals who make economic decisions to maximize their personal
benefits. However, he believed this self-interest would ultimately benefit
society through the "invisible hand" mechanism.
2.Division of Labor: He emphasized specialization and division of labor as
crucial factors in increasing productivity and economic growth. His
famous example of the pin factory demonstrated how breaking down
production into specialized tasks could dramatically increase output.
3.Natural Liberty: Smith advocated for economic freedom and minimal
government intervention, believing that individuals pursuing their self-
interest would naturally promote social welfare.

12. Criticisms of Classical Definition:-
1.Narrow definition/Limited Scope:-The critics said that this definition is
unable to include those activities which are not involved in earning wealth
like social workers.
2.Over emphasis on wealth:-The critics said that human life can’t be
sacrificed for wealth unlike this definition; rather wealth should be used for
the betterment of mankind.
3.Single source of wealth:-In the view of critics, apart from wages, natural
resources, human resources, capital resources, and financial resources are
also the sources of wealth.
4.Unrealistic concept of Economic person:-According to critics, human
beings have also their own qualities of life such as feelings of love, respect,
sympathy, self-esteem, etc. regarding earning wealth.

13. Alfred Marshal’s Definition of Economics
•Neo-classical Economist Alfred Marshal had defined the welfare definition in
1890 A.D. He was a scholar of British and professor at Cambridge University.
•He published the famous book‘Principles of Economics’and defined economics
as a science of material welfare.
•According to Alfred Marshal, Economics is a study of mankind in the ordinary
business of human life. In one side it is the study of wealth and the other most
important part is the study of mankind.
•Alfred Marshal shifted the definition aspect. No doubt, he said wealth is important
in human life but he considered that we should give primary importance to
mankind and secondary importance to wealth. He suggests that wealth that we
must use wealth for the better of mankind.
•Many Neo-classical Economists like A.C. Pigou, Edwin Cannan, William
Beveridge, etc. support this definition.

14. Neo-Classical Definition of Economics
•Features/Characteristics of Welfare Definition:-
1.Primary importance to mankind:-According to Marshall, Economics is the study of
mankind in the relation to wealth. It gives primary emphasis on mankind that we
should use wealth for the benefit of mankind.
2.Study of ordinary human beings:-In the view of Alfred Marshall, Economics is the
study of those human beings who are not only involving in accumulating more and
more wealth but also try to feel love, sympathy, respect, honor, etc to make their
daily life meaningful and happy.
3.Study of material welfare:-Alfred Marshall has focused on material welfare which
is the satisfaction of consumers from the consumption of basic goods or luxury
goods. He claimed that non-material welfare is not the subject matter of
Economics.
4.Social science:-This definition studies only about those human beings who live in
society. It excludes isolated people like saints, beggars, etc.

15. Neo-Classical Definition of Economics
•Criticisms of Welfare Definition:-
1.Classificatory in nature:-In the view of critics, this definition classified
human activities into material and non-material welfare, ordinary and other
business without specific differences between them.
2.Narrow or limited scope:-The critics said that Marshall was unable to
include also non-material activities that can fulfill human desires and needs
that come under the subject matter of Economics.
3.It excludes human science:-According to critics, this definition ignored
those people who live far away from society; economics should include all
people whether they live in the society of not.
4.Lack of a clear concept of welfare:-In the view of critics, welfare is different
from time, place, and circumstances. All welfares don’t promote human
welfare.

16. Lionel Robbins’ Definition of Economics
•ModernEconomistLionelRobbinshadgiventhescarcitydefinitionof
economics.HewasaBritishscholarandprofessorofEconomicsatthe
‘LondonSchoolofEconomics’.
•Hepublishedhisbook‘AnEssayontheNatureandSignificanceof
EconomicsSciences’in1932A.D.anddefinedEconomicsasthescienceof
ScarcityandChoice.
•“Economicsisthesciencewhichstudieshumanbehaviourasa
relationshipbetweenendsandscarcemeanswhichhavealternative
uses.”
•Everyoneconsidersthisdefinitionasthemostscientificandanalytical
definitiononseveralgrounds.
•ManyModernEconomistslikeKarlManger,Peter,Stigler,etc.supportthis
definition.

17. Features of Lionel Robbins’ Definition
•The following are the main featuresof Robbins’ definition
•Unlimited Wants : According to Robbins’s definition, human wants are unlimited. On
satisfaction of one wants, another want arises immediately, and this sequence
continues forever.
•Scarce Means: Robbins’s definition stated that on one side human needs are unlimited
yet on the other side, the means to satisfy these wants, like-time, power, money, etc.
are also limited. Due to this, many of man’s needs remain unsatisfied.
•Alternative Use of Scarce Means: In Robbins’s view, though the means to ‘satisfy man’s
needs are scarce, it has alternative uses. In other words, he can use every resource for
various objectives and activities. For example –a resource like land can be used in many
ways, such as it can be used for agriculture or building a house to establish a factory
etc.
•Variation in the Intensity of wants: Robbins’s definition states that the intensity of
man’s needs is different. Some wants are more intense than others. Since our means
are limited and all wants cannot be satisfied with the limited means; as a result, we
have to select some more intense wants from our unlimited wants and the less intense
wants have to be either dropped or postponed to a future date.

18. Criticisms of Scarcity Definition of Economics
•Criticisms of Scarcity and Choice Definition:-
1.It neglects burning issues of the modern economy:-The critics said that Robbins
was unable to address the burning issues of the modern economy like
unemployment, poverty, inequality, economic growth, etc.
2.Unnecessary emphasis on scarcity:-according to Robbins, only scarce resources
cause the problems but in the view of critics, economic problems arise from plenty
of resources and overproduction.
3.Similar to Marshall’s definition:-Marshall said that we should use for the
maximum material welfare whereas we should use scarce resources for maximum
satisfaction according to Robbins. In this way, they are similar.
4.Limited to the only allocation of resources:-According to critics, this definition is
only based on the allocation of resources. So, it should study also about
production, distribution, exchange, consumption, and utilization of resources.

19. Comparison Between Marshall’s and
Robbins’s Definitions of Economics
•Some dissimilarities between Robbins and Marshall’s definition are as follows:
Marshall’s definition Robbins’s definition
1. Marshall’s definition is simple and fair. 1. This definition is complex.
2. This definition is classificatory as material & non-
material, economic & non-economic activities.
2. This definition is analytically based on basic economic
problems.
3. The objective of this definition is material welfare.3. This definition is neutral about the objective.
4. This definition considers economics as asocial science.4. This definition considers economics as a human
science.
5. Marshall’s definition is based on normative science.5. Robbins’s definition is based on the concept of positive
science.
6. Economics is related to an ordinary man. 6. Economics is related to both ordinary and
extraordinary man.