Economics

MEANING OF ECONOMICS

The word ‘Economics’ originates from the Greek work ‘Oikonomikos’ which can be divided

into two parts:

(a) ‘Oikos’, which means ‘Home’, and

(b) ‘Nomos’, which means ‘Management’.

Thus, Economics means ‘Home Management’. The head of a family faces the problemof managing the unlimited wants of the family members within the limited income of thefamily. In fact, the same is true for a society also. If we consider the whole society as a ‘family’,then the society also faces the problem of tackling unlimited wants of the members of thesociety with the limited resources available in that society. Thus, Economics means the studyof the way in which mankind organises itself to tackle the basic problems of scarcity. All societies have more wants than resources. Hence, a system must be devised to allocate these resources between competing ends.

Definition

Adam Smith, considered to be the founding father of modern Economics, defined Economics as the study of the nature and causes of nations’ wealth or simply as the study of wealth.The central point in Smith’s definition is wealth creation. Implicitly, Smith identified wealth with welfare. He assumed that, the wealthier a nation becomes the happier are its citizens. Thus, it is important to find out, how a nation can be wealthy. Economics is the subject that tells us how to make a nation wealthy. Adam Smith’s definition is a wealth-centred definition of Economics.

Microeconomics

Microeconomics is that branch of economics which is concerned with the decision-making ofa single unit of an economic system. How does an individual (or a family) decide on how much of various commodities and services to consume? How does a business firm decide how much of its product (or products) to produce? These are the typical questions discussed in microeconomics. Determination of income, employment, etc. in the economic system as a whole is not the concern of microeconomics. Thus, microeconomics can be defined as the...