Understanding

Economics
Definition of Economics

• Adam Smith defined

“Economics as a science which inquired into the nature and cause of wealth of Nations”

According to this definition

• Economics is a science of study of wealth only;

• It deals with production, distribution and consumption;

• This wealth centered definition deals with the causes behind the creation of wealth, and

• It only considers material wealth.

Definition of Economics

• According to Alfred Marshall “Economics is the study of man in the ordinary business of life”. It examines
how a person gets his income and how he invests it. Thus, on one side it is a study of wealth and on the
other most important side, it is a study of well being.

• Features:

• (a) Economics is a study of those activities that are concerned with material welfare of man.

• (b) Economics deals with the study of man in ordinary business of life. The study enquires how an
individual gets his income and how he uses it.
What is Economic Growth?

• Economic growth can be referred to as the increase that is witnessed in the monetary value of all the goods
and services produced in the economy during a time period. It is a type of quantitative measure that reflects
the potential increase in the number of business transactions taking place in the economy.

• It can be measured in terms of the increase in the aggregate market value of additional goods and services
produced by using economic concepts such as GDP and GNP.

• Economic growth is a narrow concept when compared to economic development

What is Economic Development?

• Economic development refers to the process by which the overall health, well-being, and academic level of
the general population of a nation improves. It also refers to the improved production volume due to the
advancements of technology.

• It is the qualitative improvement in the life of the citizens of a country and is most appropriately determined
by the Human Development Index (HDI). The overall development of a country is based on many
parameters such as the creation of job opportunities, technological advancements, standard of living, living
conditions, per capita income, quality of life, improvement in self-esteem needs, GDP, industrial and
infrastructural development, etc