Introduction

The English word economics is derived from the ancient Greek word oikonomikos—meaning the management of a family or a household. Economics is the study of how individuals and societies make decisions about way to use scarce resources to fulfil wants and needs. Economics deals with individual choice, money and borrowing, production and consumption, trade and markets, employment and occupations, asset pricing, taxes and much more.

As an individual, for example, you constantly face the problem of having limited resources with which to fulfil your wants and needs. As a result, you must make certain choices with your money – what to spend it on, what not to spend it on, and how much to save for the future. You’ll probably spend part of your money on relative necessities such as rent, electricity, clothing and food. Then you might use the rest to go to the movies, dine out or buy a smart phone. Economists are interested in the choices you make, and investigate why, for instance, you might choose to spend your money on a new mobile phone instead of replacing your old pair of shoes. The underlying essence of economics is trying to understand how individuals, companies, and nations as a whole behave in response to certain material constraints.

Definitions

Adam Smith’s Definition: Adam Smith, considered to be the founding father of modern Economics, defines Economics as “the study of the nature and causes of nations’ wealth or simply as the study of wealth”. The central point in Smith’s definition is wealth creation. He assumed that, the wealthier a nation becomes the happier are its citizens. Thus, it is important to find out, how a nation can be wealthy. Economics is the subject that tells us how to make a nation wealthy. Adam Smith’s definition is a wealth-centred definition of Economics.

Alfred Marshall’s Definition: Alfred Marshall also stressed the importance of wealth. But he also emphasised the role of the individual in the creation and the use of wealth. He defines: “Economics is a study of man in the ordinary business of life. It enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man”.

Lionel Robbins’ Definition: In his book ‘Essays on the Nature and Significance of the Economic Science’, published in 1932, Robbins gave a definition which has become one of the most popular definitions of Economics. According to Robbins, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.