Economics is the study of how societies allocate scarce resources. It can be defined as both a science and an art. As a science, economics uses analysis and evidence to understand cause-and-effect relationships between economic factors. As an art, economics provides practical guidance to solve economic problems. The scope of economics includes microeconomics, which examines individual markets, and macroeconomics, which looks at an overall economy and topics like growth, employment, inflation and trade cycles.

1. Nature and Scopes of Economics

2. INTRODUCTION
 The word Economics is derived from the Greek words “OIKOS” and
“NOMOS or NEMEIN” called “OIKONOMOS” meaning household
management.
 Man is bundle of desires. Goods and services satisfy these wants.
But almost all the goods are scarce. To produce goods land, labour,
capital and organization are needed. Economic problem arises
because of scarcity.
 Economics is a study of economic problems. Wants are motive force
for economic activity. wants lead to efforts. Efforts secures
satisfaction.

3. DEFINITIONS
Wealth Definition : Adam Smith (Father of Economics)
Welfare Definition : Alfred Marshall
Scarcity Definition : Lionel Robbin
Growth Definition : Paul Samuelson

4. 1. Wealth Definition
Father of Economics Adam Smith in his book
“Wealth of Nations 1776” defined “Economics is
the study of wealth”.
In this definition wealth is given first place and
man has given second place.

5. 2. Welfare Definition
 Alfred Marshall in his book “Principles of Economic Science –
1890”defined “Economics is the study of man kind in the
ordinary business of life”.
 It is mainly concerned with the study of man in relation to
wealth.
 First place to man second place to wealth.
 It studies man not in isolation but a member of social group.

6. 3. Scarcity Definition
 Lionel Robbins in his book ‘Nature and significance of
Economic Science – 1932’ given scarcity definition.
 “Economic is the science which studies human
behavior as a relationship between ends and scarce
means which have alternative uses”.
 Robbins included material and non material goods,
widens the scope of economics.

7. 4. Growth Definition
 Economics Noble Prize winner (1970) Paul Samuelson
proposes a dynamic definition in his book – Economics: An
Introductory Analysis (1948).
 “Economics is the study of how people and society end up
choosing with or without money to employ scarce productive
resources that could have alternative uses to produce various
commodities and distribute them for consumption, now or in
the future among various persons and groups in society.
Economics analysis the cost and benefits of improving patterns
of resources use”.

8. Nature of Economics
1. Economics is a Science
Science is an organized branch of knowledge,
that analyses cause and effect relationship
between economic agents.
a. Economics and Positive Science:
Economics as a positive science simply provide results of economic analysis of a problem. It does not
indicate what is good or what is bad to the society.
b. Economics is Normative Science:
It makes distinction between what is good and what is bad. Positive statement is based of facts while
normative statement involves values and ethics.
2. Economics is an Art:
An Art is a system of rules for the attainment of the given end. So, Economics is an art too, as several
branches of economics offers us practical guidance in the solution of economic problems.
“It’s a science in its methodology and art in its application”.

9. Scope of Economics
Scope means province or field of study. Different
Economists have different views regarding the scopes of
Economics.
The scope of Economics divided into two broad categories :
1. Micro Economics
2. Macro Economics

10. Scopes of Micro Economics
The scope of Micro Economics includes mainly three theories.
1) In theory of product pricing
Price determination of consumption good is studied which includes both
demand as well as supply sides.
2) In theory of factor pricing
Price determination of factor of production i.e. rewards to factors for their
contribution in production is studied.
3) Theory of economic welfare
In micro economic analysis it is studied how to distribute the given
quantities of goods and services among different consumers efficiently so as
to maximise the economic welfare.

11. Scopes of Macro Economics
1) Income and Employment Theory:
Macro Economics is concerned with the determination of the level
of employment in the whole system and variations in it.
2) Theory of general price level and inflation:
Macro Economics studies the various components of money
supply and effect of them on the economy.
3) Theories of Trade cycle:
Macro Economics studies the problems of ‘boom ’and
‘depression’ which every economy faces during the process of its
development

12. Cont…..
4) Theory of Economic Growth
Macro Economics studies the problems relating to economic growth or
increase in per capita real income.
5) Macro Theories of Distribution:
Macro Economics studies the equitable distribution of income among
various factors of an economy.