ECONOMICS
Economics is a social science concerned with the production, distribution and consumption of goods and services.
Economics is the study of how society allocates scarce resources (land, labour, capital, and entrepreneurship)to produce output (goods
and services).
In simple terms economics is the study of how society uses its limited Resources
English word economics is derived from the ancient Greek word oikonomia-meaning the management of a family or a household.
The study of wealth is called: Aphnology
The father of modern Economics: Adam Smith.
ADAM SMITH’S WEALTH DEFINITION
Economics is a study of wealth
Received great support from the Father of economics, Adam Smith(Scottish economist),in the late eighteenth century.
This definition is too narrow as it does not consider the major Problems faced by a society or an individual.
ALFRED MARSHALL’S WELFARE DEFINITION
Alfred Marshall (English Economist)in his book ‘Principles of Economics’ published in 1890 placed emphasis on human activities or
human welfare rather than on wealth.
Marshall defines economics as “a study of men as they live and Move and think in the ordinary business of life”.
Marshall’s definition ignores the fundamental problem of scarcity of Any economy
LIONEL ROBBINS’S SCARCITY DEFINITION
Most accepted definition of Economics was given by Lionel Robbins (British economist in 1932 in his book “An Essay on the Nature
and Significance of Economic Science’.
His definition runs in terms of scarcity: “Economics is the science which studies human behavior as a relationship between ends and
scarce means which have alternative uses “
GROWTH-ORIENTED DEFINITION OF ECONOMICS - SAMUELSON
The growth-oriented Definition of Economics was given by Prof. Samuelson.
Economic growth is measured by the change in national output over Time.
Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive
Resources that could have alternative uses to produce various Commodities over time and distributing them for consumption, now Or
in the future, among various persons or groups in society.
LAISSEZ FAIRE POLICY
Laissez Faire policy is the Policy of minimum governmental Interference in the economic affairs of individuals and society.
French Meaning: “Leave us alone.”
This theory of Free Market or Free economy was defended by Adam Smith
The policy of laissez-faire received strong support in classical economics as it developed in Great Britain under the influence of
Economist and philosopher Adam Smith (Wealth of Nations-1776)
Study of wealth is called: Aphnology
Study of the economy of any country helps us to find the financial Condition of the population as well as the different working sector of the
economy
FAMOUS ECONOMISTS THEORIES
ELASTICITY OF DEMAND – ALFRED MARSHALL
It is associated with Alfred Marshall
Elasticity of demand refers to the responsiveness of demand towards the Change in price
Alfred Marshall’s Principles of Economics developed a supply-and-demand curve that is still used to demonstrate the point at which
the market is in Equilibrium
PRODUCTIVITY THEORY
Productivity theory in economics was developed at the end of the 19th century by John Bates Clark and Philip Henry Wicksteed
MALTHUSIAN THEORY OF POPULATION
Malthusian Theory of Population is the theory of exponential Population and arithmetic food supply growth proposed by Thomas
Robert Malthus.
THEORY OF DISTRIBUTION:DAVID RICARDO.
3 BASIC ECONOMIC ACTIVITIES IN AN ECONOMY
PRODUCTION CONSUMPTION CAPITAL FORMATION
FACTORS OF PRODUCTION
Factors of production are those inputs used in the production process to produce the outputs (finished goods and services).
There are mainly four factors of production:
1. Land.
2. Labour.
3. Physical Capital.
4. Human Capital.
Why is production low in many economies?
Goods and services are scarce because the four factors of production are scarce;
1. Land
2. Labour
3. Capital
4. Entrepreneurship
