What is economics? How do we define economics?

What is economics? How do we define economics?

What is economics? How do we define economics?

Economics is defined by a number of definitions but in every definition we are not able to covering the every aspect of economics. It has vast and huge activity. It is a social science and its cover the every aspect of ours social life and day today life. So in simply we can say that “Economics is a study of economic activities of the world”. According to Jacob Viner, "Economics is what economist do”. Economics also commonly defined as “Economics is the study of those activities that involves production and exchange among people”

Economics as an academic discipline study is not so much old. It has nearly two-three century ago when economics consider as a systematic study for the society. That means there is no economics before that? No. Economy of the world had been started from the ancient time, when people used to habituate with barter economy or may be the earlier time of that. Many ancient teachers wrote their manuscript and explain the economic, political condition of that time. Chanakya, who is also identified as Kautilya, the great Indian teacher, authored of the Indian political treatise, the Arthashasstra between 3^rd century BCE and the 3^rd century CE.

Earlier time when barter economics had existed people used to pay more of their valuable things which commodity had a large demand in the market. So economics start from the demand and supply concept from the earlier time. Later, when people had realized the importance of medium of exchange and introduced price as a medium of exchange then economics had consider as a price theory.

During the sixteenth to the three fourth of the eighteenth century the world has being conducted according to the doctrine of mercantilism. Mercantile believed that the power of nation lied on his wealth. So according to them a country became powerful if the country was curbing its imports and promote exports. In 1776 Adam Smith introduced the free market concept in his book ‘The Wealth of Nations’. According to Adam Smith a country can achieve the prosperity if the country concentrate on its wealth and utilize the resources in optimally. Adam Smith believed on the free market mechanism. Adam Smith is considered as the father of the economics.

How economics works

Commonly when we are discussing about economics we are searching some common questions related with some social activity like demand, production, supply, cost, market situation etc. So according to Prof. Samualson any society faces three basic problems. They are 1) what commodity shall be produced and in what quantity? 2) How the good shall be produced? And 3) whom it to be produced?

So these questions are very much common in all type of economic structures. In command economy the question will be solved by the government decision and government decided the commodity type the quantity and the market power. In capitalist economy market system revealed, where the commodity type, quantity and price determines by how much incentive and profit you get from the production. The third type economics is mixed economics where command economics ad capitalist economics co exists. In mixed economics in one hand government control the economy by solving the answers on respect of the social aspect and on the other hand capitalist solve the problem by free market mechanism and deal with the production on respect of the profit issues.

So in every aspect we are mainly solving the three main basic questions.

Economics as a study

We are mainly divided into two parts of the economics in respect of the study of economics .They are Micro economics and Macro economics. These terms were first used by Ragner Frisch. The word Micro comes from the Greek word 'Mikros' which means small and macro comes from Greek word 'Makros' which means large.

Micro Economics

Micro economics deals with the theory and analysis of individual behavior. In micro economics we are mainly focusing on Individual Consumer behavior, its demand, supply, production theory, cost theory and different market structures and its behavior. General equilibrium theory and Welfare economics is also a important part of the Micro economics study.

Macro Economics

Macro Economics deals with the theory and analysis of aggregation sense. In macro economics we are dealing with government policies, total national output, national income, total consumption and aggregation investment etc.

Beside micro and macro economics now a days we are concentrate on modern economics, development economics and International trade theory.

Now a day’s different theory developed on the theory of internal and external trade. In international trade theory we are analyzing how a county improve their trade with absolute and comparative advantages of production and with the help of the resources.

In development economics we are focusing on various theories to develop the countries growth and development. We are analyzing different theories on aspect of developed and developing countries.

What is Managerial economics?

Managerial economics, has also known to us as a business economics. A bunch of micro economic theory which analytically developed from the study can be used in managerial decision making. Such methods developed on demand and cost analysis. Different micro economic models help the decisions maker in business enterprises

Conclusion

So economics is a study of social science and we can divide it in to two categories. One is positive category and other is normative category. Positive economy concerned to describe the fact, circumstances, relationship in the economy. It explains theories and laws in observed phenomena. On the other hand normative economy involves ethics and value judgment. It describes what should be in the economy if we adopt some laws or theories.

In modern times various new theories also developed due to the massive structural change of the market strategies and change of the demand and supply concept of the society.