Meaning and Definition of Economics

People’s economic wants are of a very large number and they are also diverse in character. Biologically humans need only air, water, food, clothing and shelter. But in contemporary society we also seek many goods and services associated with comfortable or affluent standard of living. 

Fortunately, society is blessed with productive resources-labour and managerial talent, tools and machinery, land and mineral deposits-that are used to produce goods and services. This production satisfies many of our economic wants and occurs through the organizational mechanism called the economic system, or, more simply, the economy. 

The blunt reality, however, is that our economic wants far exceed the productive capacity of our limited or scarce resources. So, the complete satisfaction of society’s economic wants is impossible. This unyielding truth provides our definition of economics:”It is the social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants”. 

Over the last half-century the study of economics has expanded to include a vast range of topics. The major definitions of economics are: 

• Explores the behaviour of the financial markets, including interest rates and stock prices. 

• Examines the reasons why some people or countries have high incomes while others are poor and suggests ways that incomes of the poor can be raised without harming the economy. 

• Studies business cycles-the ups and downs of unemployment and inflation-along with policies to moderate them. 

• Studies international trade and finance and the impacts of globalization. 

• Looks at growth in developing countries and proposes ways to encourage the efficient use of resources. 

• Asks how government policies can be used to pursue important goals such as rapid economic growth, efficient use of resources, full employment, price stability, and a fair distribution of income. 

If we boil down all these definitions, we find one common theme, that is,’ 

“Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.”

Notes provided by Prof. Sujatha Devi B (St. Philomina's College)