Basics of EconomicsMichael ParkerH.L. AhujaMohammad Saiful Islam
What is Economics?Adam Smith and J.B. Smith: Economics is the science which treats of or relates to material wealth and economic growth.Alfred Marshall:Economics is the study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-beingLionel Robbins:Economics is a social science which studies human behavior as a relationship between ends (wants, which are unlimited) and scarce means, which has alternative use.Paul Samuelson:Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive, resources which could have alternative uses, to produce various commodities
Thus, Economics is a social science which studies how society uses scarce resources (both material and immaterial) to produce goods or services and allocate them among competing groups or individuals to satisfy their unlimited wants and to achieve economic growth and stability .These definitions generate following economic facts:1.Unlimited want: Want is the willingness to possess something regardless of the affordability. The inherent nature of human is to want more and more.2.Scarcity of resources: Scarcity is the inability to satisfy all our want. Resources are the natural productive means, man-made capital goods, consumer goods, money and time available with men etc. As resources are finite and are not available to meet all the wants of a human being, the economic problem arises.3.Alternative usage of resources: If the resources would have a single use, the question of choices would not arise.
Fundamental Economic Problem1.What to produce: Society falls into a dilemma to decide which goods to produce and in what quantity for each type of selected goods. To goods can be produced using the available but scared resources to satisfy society’s unlimited needs. 2.How to produce: A combination of resources implies a technique of production. The choice between different techniques depends on the available supplies of different factors of production and their relative prices.3.For whom to produce: How the national product should be distributed among the producer or the owner of factor of production and how much.