Part A: Basic Economic Concepts.
NATURE OF ECONOMICS
Economics is all around you. It is about how society deals with the problem of scarcity. We cannot have everything we want, whether it refers to continuous holiday or perfectly clean air. We have to make choices. Economics is the study of how society makes these choices. Economics is not just about incomes, prices, and money. Sometimes it makes sense to use markets; sometimes we need other solutions. Economic analysis helps us to decide when to leave things to the market and when to override the market"
-David Begg, Stanley Fischer and Rudiger Dornbusch
1 Origin of Economics
Economics is a branch of social science. It commenced with the publication of Adam Smith's book "An Inquiry into the Nature and Causes of Wealth of Nations" in 1776. Before that economics was a part of politics, ethics and religion. In early and middle part of the 19th century, it was called political economy. Towards the end of century, it was called "Economics" a change from political economy. Economics was derived from the Greek word Oikos (house and to manage). Thus, economics means to manage household affairs with limited fund available in the most economic manner possible.
2. Definitions of Economics.
Economics has been defined in different ways in different times such as (1) Wealth (2) Welfare (3) Choice and (4) Growth.
Adam Smith, the father and foremost among the classical economists, defines economics as the science of wealth. His book "An Inquiry Into The Nature And Causes Of Wealth of Nations" is itself the definition of economics.
The implications of this definition are
(i) Human beings have wants to satisfy;
(ii) The main concern of economics is the satisfaction of human wants; and,
(iii) Wealth satisfies human wants.
Thus, the study of economics show, how wealth is produced and spent. J. B. Say,...