What is Economics? A Review

Definition of Economics
Economics can be defined as the science of wealth and material welfare of society.
To be straightforward let us come direct to the point-

• Economics is a scientific study of the allocation of scarce resources to their best uses.
• To economise is to save or utilise for maximum possible satisfaction out of those scarce resources.
• Economics is the study of wealth, material welfare of society and human behaviour related to these concepts of wealth and material welfare.
• Wealth is not simply money. It refers to everything from natural resources to manufactured or produced products and material welfare is the allocation and distribution of these resources and wealth among society.

Need for Economics

Our world is full of resources. But, either they are scarce and insufficient to meet all our demands or we are unable to unearth them / produce them as much as to meet all our requirements. So our demands are always on higher side than the resources that are available to us at any point of time. So the need for economy arises.

If, we had been bestowed with abundance of resources that can last for ever, there would have been no need for economics. But the fact is that we are short of supply and so unable to satisfy all our demands. So, we are forced to undergo or cut short our needs to tally with the supply. So, we have to choose among our alternate multiple needs and try to satisfy the most urging needs first. Economics studies this behavioural pattern of people and sets guidelines to the economic system as a whole.

What does Economics do

Now the main objective of economics is to study this problem of scarce available resources and the always mounting needs of people to suggest some positive solution. For this purpose, the economists keep a continuous watch on the behavioural pattern of the consumers and public and after much exercises, arrive at some conclusions regarding projections of behavioural pattern of people under certain stimulated conditions. These conclusions are then, submitted to the government and the financial/ banking institutions for framing their economic policies.

For example, suppose a person with a certain income of Rs.50, 000 per month pays a monthly rent of Rs.10, 000, electricity bill of Rs.2, 000, internet/ phone bill Rs.1, 500, maintenance Rs.1, 500, housemaid payment Rs.2, 000, medicines Rs.5, 000, provisions Rs.5, 000, gas refil Rs.1, 000, milk Rs.2, 000, vegetables/ fruits Rs.1, 500, petrol Rs.10, 000, and invests Rs.5, 000 each month. So his total monthly expenses amounted to Rs.46,500. Now, he will be left with Rs.3, 500 only for other expenses. He may have to choose between buying a new set of new clothes or watching movie with friends or partying on week end with that balance amount. He can not meet all these from his balance income simultaneously. So he will think of buying clothes one month, watching movie in another month and weekly partying in yet another month. He will have to plan in this way and adjust his needs.

Economists watch this decision making of people in choosing among alternate options and under alternate circumstances and environments. They formulate some general laws based on this behavioural changes and project proper reform policies according to these surveys. They will see the effects of increase or decrease in supply and demand, and changes in the availability of funds in consumers' pockets, and effects of price changes on demand and supply, etc. All these factors are studied by stimulating some artificial conditions also for research purpose.

So, you must have now understood What is Economics and Why it is Important. Economics plays an important role in our daily life guiding all our monetary decisions according to the availability of resources and multiple needs.