WHAT IS

ECONOMICS
?
 ECONOMICS

IS A SUBJECT
Which tells us about our Country.
What it tells?
• Economic and Non-economic activities
• About our countries problems
• Solutions of them….
Economic Activities : These are those activities which are
undertaken to earn a living. These are :

• Production: It is an economic activity in which producer produces

goods and services and sell it into the market to earn profit.
• Consumption : It is an economic activity in which consumer
consumes goods and services to satisfy their daily needs.
• Distribution: It is an economic activity which is concerned with
the distribution of income generated among various factors of
production.

Non- Economic Activity: These are the activities which are

undertaken not to earn a living. Such activities are not concerned
with the creation of money or wealth.
Ex: Mother making a food for us in the kitchen, blood donation camps
Countries Problems:

• What to produce?
• How to produce?
• For Whom to produce?
• Poverty
• Unemployment
• Illiteracy
• And many more…….

Solutions: It totally depends upon the type of SYSTEM they

follow….. It MEANS..

Type of
ECONOMY
?
WHAT IS ECONOMY ?
Economy is a system by which
people of an area earn their living.
 HISTORY
Who is the FATHER of Economics?

Adam Smith
Wealth definition :
Adam Smith defined economics as the science
of wealth. According to him ," Economics is an
enquiry into those factors which determine the
wealth of the Nations and growth of this wealth."

Criticism
1) this definition was limited only to material wealth
and ignored wealth like services of doctors, teachers
etc.
2) it ignored human welfare.
Material welfare definition:
This definition was given by Alfred Marshall.
He shifted the emphasis from wealth to welfare.
According to him," Economics is the study of
mankind in the ordinary business of life and it
examines that part of individual and social action
which is closely related to the attainment and use
of material requisites of well-being."

Criticism
1) this definition ignored immaterial wealth like
services of doctors, teachers, etc.
2) the concept of welfare cannot be defined exactly.
Scarcity definition :
This definition has been given by Robbins.
According to him, “Economics is a science of choice
making. It deals with how the scarce resources of
the society should be used for the satisfaction of
human wants.”

Criticism
1) it does not tell what is good or bad for social
welfare.
2) it does not cover the theory of economic growth
and development.
Growth definition : A modified definition has
been given by Paul A. Samuelson. According to
him," Economics is a study of how men and society
choose , with or without the use of money , to use
squares productive resources having alternative
uses, to produce various commodities over time
and distribute the same for consumption now and in
the future amongst various people and groups of
society."

His definition emphasis

1) efficient allocation and use of scare resources.
2) increase in the rate of economic growth and
3) promotion of economic welfare.

This definition of economics is considered to be the most

comprehensive of all the earlier definitions.
Name of Economist On the Concept

Adam Smith Wealth definition

Alfred Marshall Material welfare definition

Robbins Scarcity definition

Paul A. Samuelson Growth definition

WHAT IS ECONOMICS?

Economics is the study of how Human Beings make

choices to allocate the scare resources to satisfy their
unlimited wants in such a manner that :

• Consumer can maximise their satisfaction level,

• Producer can maximise their profits and
• Society can maximise their social welfare.

Consumer ------- Maximum Satisfaction

Producer ------- Maximum Profit
Society ------- Maximum Social Welfare
S.No Positive Economics Normative Economics
1. This economics deals This economics deals with
with economics issues or opinions of the
problems related to past, economist related to the
present and future. economic problems.

2. Statements of this Statements of this

economics related to economics related to 'what
‘what was’, ‘what is’ ought to be.'
and ‘what would be’.
3. Statements of this These statements cannot
economics are not be termed as true or false.
necessarily the These statements involve
statements of truth. opinion only.
These may be true or
false.
4. Facts and figures are These statements are not
verifiable for truth. verifiable at all.
5. This economics does Does economics involve
not involve value value judgment.
judgment.
Economic Problem :
It is a problem related to Choice and problem of
economical use of resources.

Types of economic problem

1) Scarcity: It means what you have is less than what
you wish to have.
which means supply is less than demand
2) Choice :It is a process of selecting the best good from
the available resources.

Causes of Economic Problems:-

1. Unlimited wants
2. Limited resources
3. Alternative resources