This document provides an introduction to key economic concepts and terms including: 1) It defines economics according to Adam Smith, Alfred Marshall, and Lionel Robbins focusing on wealth, welfare, and scarcity. 2) It outlines the main divisions of economics as consumption, production, exchange, distribution, and public finance. 3) It explains basic economic concepts such as goods, utility, wants, value, price, market, and income.

1. N.DHINAKARAN
ASSISTANT PROFESSOR OF ECONOMICS
VIVEKANANDA COLLEGE
TIRUVEDAKAM WEST
MADURAI
Course Title : General Economics-I
Course Code: 01AT01

2. UNIT-I
Introduction: Definitions of Economics – Adam Smith, Marshall and
Robbins - Main Divisions of Economics - Basic Concepts - Goods –
Utility - Wants – Value – Price - Market and Income.

3. INTRODUCTION
• The term ‘Economics’ is derived from two words of Greek language, namely, Oikos
(household) and Nemein (to manage), meaning thereby household management.
• Earlier, it used to be called as Political Economy. In fact, Indian scholar and philosopher,
Chanakya (Kautilya) in his famous book ‘Arth-Shastra’ has examined both kinds of activities,
i.e. economics and political.
• Greek philosopher Aristotle had used the term economics to mean the management of ‘family
and the state’.
• Dr. Marshall was the first to use the term ‘economics’ in 1890 in his famous work “Principles
of Economics”.
• The science of Economics was born with publication of Adam Smiths' book , “ An Enquiry
into the Nature and Causes of Wealth of Nation” Published in 1776.
• In 1933, Prof. Ragnar Frisch, a famous economist of Oslo University, Norway, divided the
study of economics into two parts:
• i) Micro Economics, and ii) Macro Economics
J.M. Keynes wrote a book on General Theory of Employment, Interest and Money in 1936.

4. Definition of Economics
1. Wealth Definition
2. Welfare Definition
Scarcity
Definition

5. Wealth Definition
Adam Smith ( 1723 – 1790 ) the father of economics in his book , “An Enquiry
into the Nature and Causes of Wealth of Nation”in 1776.
According to Adam Smith Economics as , “ The Science of Wealth”
Explanation
According to Adam Smith , Economics was regarded as the science which
studied the production and consumption of wealth. It deals with acquisition ,
accumulation and expenditure of wealth . It is for this reason definition is called “
Wealth Definition”.
Features of Wealth Definition:
Economics is a study of Wealth only:
Nature of Meaning of Wealth:
Causes of Wealth:
Economic Man

6. Criticism of Wealth Definition
More Emphasis on Wealth
Narrow meaning or Wealth:
Concept of Economic Man
No Emphasis on Welfare:
Neglect of the problem of scarcity and choice:
Neglect of means of attaining wealth:

7. Welfare Definition or Alfred Marshall Definition
 Alfred Marshall (1842 – 1924) was the first Economist who shifted the emphasis from wealth to
welfare in his book “ Principles of Economics” published in 1890.
According to Marshall “ Economics is on the one side a study of wealth and on the other more
important side a part of the study of man”.
Definition
According to Marshall , Political Economy is a 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 the material requisites of well being”.
Features of Welfare Definition:
Importance to the study of Man:
Study of Social Man:
Ordinary Business of Life:
Study of Real Man
Material Requisites
Promotion of Welfare:
Money is the measure of material welfare:

8. Criticism of Welfare Definition
Regarding Ordinary Business of Life:
Limited Scope:
Uncertain Concept of Welfare:
Economic is a Human Science:
Not Analytical but Classificatory
Impractical:

9. Scarcity of Economics or Robbins Definition
Lionel Robbins not only Criticized Alfred Marshall Welfare Definition , but also
provided a new definition in his book, “ Nature and significance of Economic
Science” published in the 1932.
Definition
Robbins defines Economics as “ The science which studies human behavior as a
relationship between ends and scarce means which have alternatives uses”
Features of Scarcity Definition:
Various Ends
Scarce Means
Alternative Uses of Means
Varying Importance of Wants

10. Criticism of Scarcity Definition
Concealed Concept of
Welfare
Scarcity is not the
Cause of Economic
Problem
Not fully
applicable to rich
countries
Not applicable to
centrally planned
economies
Not applicable to under
developed countries:

11. Main Division of Economics
1.Consumption
2. Production 3.Exchange
4.
Distribution
5.Public
Finance

13. Basic Concepts in Economics
Meaning of Goods:
Anything that satisfies a human want is called goods.
Goods
A) Free Goods B) Economic Goods

15. Utility
Meaning of Utility
In Economics , Utility means , “the capacity or power of a thing to satisfy human
wants”.
Features of Utility
1. Utility is
subjective
2. Utility does not mean
Usefulness
3.Utility is
variable
4. Utility is not
Measurable

17. Wants
• Human Wants
Human being has many desires which culminate into wants. There is no end to
human wants. Some wants are to meet basic necessities of life whereas some are
to make life more comfortable and luxurious.
Features of Human Wants:
Human wants are unlimited
Want is satiable with respect to time / place
Wants are Complementary
 Wants are Competitive
Wants are alternative
Wants Recurring:

18. Value
Meaning of Value:
The value of commodity means its power of commanding other commodities in
exchange. It is express the relationship between two commodities.
Characteristics of Value
1. Utility 2.Scarcity 3. Transferability

19. Price
Meaning:
When the value of a commodity is expressed in terms of money, it is called price.

20. Market
Meaning:
The term market refers to the interaction of buyers and sellers a particular
place is called market.
Market
1.Local Market
2.Natioal Market
3.International Market

21. Income
• Meaning:
A person may earn income by rendering service. Laborers receive their
income as wage daily or weekly. Teachers may receive income ( salary)
monthly.
INCOME
Money Income
Real Income

22. THANK YOU