1 Definition Of Economics

Every scholar tends to define economics to suit his purpose, for instance,

Adam Smith (1776) defined economics as an enquiry into the nature and causes of the wealth of nations

John Stuart Mill defined economics as the practical science of production and distribution of wealth

Davenport defined it as the science that treats phenomenon from the standpoint of price.

Alfred Marshall, on his part, did not consider wealth as a means itself but rather a source of human welfare. Therefore he defined Economics as a study of mankind in the ordinary business of life.


2 Definition Of Economics (cont)

Davenport defined it as the science that treats phenomenon from the standpoint of price.

Alfred Marshall, on his part, did not consider wealth as a means itself but rather a source of human welfare. Therefore he defined Economics as a study of mankind in the ordinary business of life.

3 Definition Of Economics (cont)

A more acceptable definition of economics is that given by the Lord (professor) Lionel C. Robbins who defined economics as “a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”. This definition is more embracing because it incorporates the most fundamental human problems such as wants, scarcity, and choice.

4 Scope Of Economics

The discussion on the true scope of economics should compromise the following;

  • The subject matter of economics.
  • Whether economics is a science or art.
  • A positive or normative science. Generally, economics deals with how society can make the best use of its scarce resources, therefore, it involves production, distribution, exchange, and consumption of goods and services.

5 Basic concepts of Economics - Wants

1. Wants: This is the desire to acquire and use the various goods and services in order to satisfy human needs, expectations, and objectives. It includes human basic needs such as food, shelter and other needs such as cars, aircraft, etc. therefore, human wants are said to be insatiable, that is unlimited.

6 Basic concepts of Economics - Scarcity

2. Scarcity: Scarcity is defined as the limited supply of resources which are used for the satisfaction of unlimited wants. In other words, scarcity is the inability of human beings to provide themselves with all the things they desire or want. Individuals, households, firms and government alike are faced with limited (scarce) resources and as such, they cannot all satisfy all their wants.

7 Basic concepts of Economics - Choice

3. Choice: Choice is the act of selecting one out of a number of alternatives. Human wants are many and we cannot satisfy all of them because of our limited resources. We, therefore, decide which of the wants we can satisfy first. Choice arises as a result of scarcity of resources. Since it is difficult to produce everything one wants, Choice has to be made by taking up the most pressing wants for satisfaction based on the available resources.

8 Why do we study Economics

  • It helps individuals, firms, and societies in national choice making.
  • It enables us to understand our economic environment and to design ways of positively influencing them.
  • It assists the government to design and package programmes that would be beneficial to the people.
  • It guides us in the rational allocation of resources towards ensuring efficiency and avoiding wastages.
  • It encourages rational thinking and positive solution to life’s material problems.

9 Branches of Economics

  • Micro Economics: This is the branch of economics that studies the economy in units, e.g individual consumers, households and firms. It is concerned with the pattern and structure of individuals, firms and industries.
  • Macro Economics: This is the branch of economics that studies the economy as a whole e.g aggregate demand, national income, investment, unemployment, the balance of payments, etc.
  • Positive Economics: This is an approach to economic analysis that is scientific in nature. It uses tested economics theories for analysis and economic predictions.
  • Normative Economic: This aspect of economics entails analysis economic issues or situation on the basis of opinions and not generally accepted theories. it is based on value judgment.

10 Meaning / Definition

Production can be defined as the conversion of raw materials into finished or semi-finished goods to satisfy human wants. It is the creation of utilities.