Nature and Scope of Economics:
Introduction
Economics is a social science that deals with human needs and their satisfaction. It is mainly concerned with the manner in which a society decides to employ its scarce resources that have substitute uses, for the production of goods for current and future consumption.
Political economy is the other name for economics. "Polis" in Greek means State. The early on writers employed the term "Political Economy" for the management of State. A person who runs a family is predictable to make the best utilization of the income of the household. Likewise, the State is expected to acquire the maximum profit for the society. Therefore the word "Political Economy".
The presence of human needs is the beginning point of all economic activity in the world. Unless we build efforts, we cannot satisfy needs. Therefore, needs, efforts and satisfaction form the circle of economics. We might say economics is the science of requirements. However in the real world, the means that fulfill our wants are restricted, that is, there is scarcity of the means that satisfy our needs. Time and money are imperfect. And land, labor and capital that are employed in production are limited. Although science has raised our resources, our needs have also raised. We might satisfy some wants now. However soon, new wants come into view. However all our wants can't be satisfied since means are very limited.
We study economics as there is scarcity of numerous goods we want. This trouble is common to the individual and also the State. That is why we state Economics is the science of scarcity. And scarcity is the fundamental fact of life.
Our needs are unlimited but means are restricted. This leads to choice- making. When there is unlimited supply of goods that satisfy our wants, the trouble of choice will not occur. It is true that we have numerous wants. But all wants are not of equivalent significance. Therefore we select the more significant and the more urgent wants. Therefore choice is the spirit of economic activity. We might also say that economics is the science of choice. Obviously, all goods we want are not limited. There are many things such as air and sunshine that are available in plenty. Though they are very necessary for our life, we don't pay any charge for them. They are free goods and they are not very significant for our study. However most of the things we want are scarce and we have to pay a price for them. Therefore in economics, we study how prices of different things are established. We might also say that economics is a science which deals with pricing procedure.
Modern economy is a financial economy. Prices are paid in money. Therefore money plays a significant role in the economic life of a society. It is employed for buying and selling of goods, for payment of wages, rent, interest and so forth. In economics, we study concerning the role of money in the affairs of humanity.
We shall now sum up our conversation about the economics nature. Economics is a social science which studies about human needs and their satisfaction. Human wants are limitless. Therefore scarcity is the primary fact of life. As all needs are not of equivalent importance, this leads to selection. Economics is the science of choice. Since there is scarcity of goods, we have to pay a price for them. Therefore, economics studies about the pricing procedure. And, as prices are paid in money, we study about the portion played by money in the economic life of a civilization. We study how people get and spend money, how they earn a living and how it affects their approach of life and so forth. All the scarce goods that satisfy our wants are known as wealth. Therefore, in economics, we study about the exchange of wealth, production of wealth, distribution of wealth and using up of wealth. Since wealth is produced to encourage human welfare, we study the relationship among wealth and welfare.