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1Why is Economics important? Scope of Economics

 

Economics has evolved in centuries due to the increasing problem of scarcity of resources.

To understand the scope of economics, we need to understand why we need economics.

The main aim of the subject is to maximize the efficiency of how we use the resources present.

The term economics itself is derived from the terms, i.e. economy and science. It means the science of the economy or the science of proper utilization of the resource.

Before we go in deep to understand the scope of economics, we must briefly see what are the top opportunities. Check out our article on Career Options in India after Bachelor in Economics to know more.

Top opportunities in Economics

opportunities in economics

  • Chegg subject expert:

This is one of the best part-time jobs which you can do and earn a good amount of money.

chegg Jobs

An average income of a subject expert at Chegg is Rs.30k to Rs.50k.

  • Teaching professions:

Schools and colleges teach economics from basics to masters. The scope of economics in the teaching field is vast.

  • Indian Economics Services:

To land a government job you can give the exam conducted by UPSC. The age range is 21-30 years. You must have completed M.A or M.S.C with at least 55% marks.

  • Market Research Analyst:

They study how the market works by studying the market trends, and preferences of customers. They also study on what factors these preferences depends.

This research helps businesses in identifying the target customers, ways to advertise their products and services.

Eg- BLS(Bureau of Labour Statistics) predicted that by 2028 the employment in this field will increase by 20%.

  • Credit Analyst:

Investment companies, credit card companies, investment and commercial banks and credit rating agencies need credit analysts.

A credit analyst analyzes the credit score or creditworthiness of organizations and individuals. This help them in getting loans and making investments.

The median salary earned by credit analyst in May 2019 was $73,650, data by Bureau of Labour Statistics.

  • Business Writer:

A business writer writes proposals and plans for a company. They also report the financing, stock markets or other economic happenings for publications.

A good business writer requires to be good at research and writing skills as well.

  • Work as a Consultant:

Economic consultants study market trends with high research and analytical skills.

They analyze different market trends and help organizations and individuals in promoting their businesses.

  • Banking:

Banking Services are also a great career path for economics graduates.

These are some of the significant jobs available in the field.

Understand the nature and scope of economics

  • Various definitions of the subject, categorized under the different viewpoints.
  • The aspects, scope of economics.
  • Basic concepts of economics.
  • Problems associated with any economy.

The classical view of economics.

“Science of wealth” this is what classical economists defined economy. They considered only the science which deals with material wealth as the scope of economics. All the services were out of the scope of economics.

Now, let’s look at how different classical economists took economics differently:

  • Adam Smith: He is also known as The father of economics. He defined economics as the science of wealth. According to him production and expansion of wealth are two which defines the scope of economics.
  • David Ricardo: He was one of the most influential political economists in British. To him, the scope of economics lies in the distribution of wealth, not in the production.
  • Jean-Baptiste Say(J.B Say): Best known for the Say’s law was a French economist and businessman. He not only included production and distribution but also the consumption of wealth to the scope of economics.

Due to some points, people highly criticized classical economics:

  • Due to not considering of non-material services as part of economics.
  • Services of doctors, teachers and lawyers etc. also generate, produce and consume wealth.
  • Primary importance was given to wealth instead of humans.

The Neo-Classical view of economics-

Economics under this viewpoint is defined as the science of material welfare.

The author of the leading textbook “ The Principles of Economics”, the Alfred Marshall, led the neo-classical economists. It helped economics gain a respectable place in the social sciences.

Wealth here is not regarded as an end to itself but as the means to the end. The economy is taken here as the source of human welfare.

Scope of economics to neo-classical viewpoint considers all the activities that promote economic welfare for the society as a whole.

Lionel Charles Robbins criticised the above definition of the neoclassical view.
  • Firstly, the use of material activities narrows the scope of economics. There are many non-material activities which help promote human welfare.
  • There are many activities like tobacco which are material activities and promotes the economy at a great rate but don’t promote human welfare.
  • The use of word welfare is in itself very subjective.

According to him, the scarcity of resources is the reason for economics.

Scarcity and choice definition.

Lionel Charles Robbins gave this concept. Economics is a human science which involves the best use of scarce resources so that the society is satisfied.

With the scarcity of resources and maximizing the satisfaction comes into the picture, the various alternatives to the resource.

To sum-up Robbin’s definition of the scope of economics involves three points:
  • Unlimited wants.
  • Scarcity of resources.
  • Alternative use of resources.

It doesn’t distinguish between material and non-material. It considers all the economic activities given that it satisfies the want of humans.

Due to some points, this theory was also criticized:

  • The use of word welfare is in itself very subjective.
  • His definition doesn’t analyze the economic growth and development.

This scope of economics is unable to see the economic problems of the real world. Hence, it can only be applied to a fully employed economy.

Samuelson’s growth-oriented definition

“Economics is the study of how people and society end up choosing, with or without the use of money, to employ scarce productive resources that could have alternative uses to produce various commodities over time and distribute them for consumption, now or in the future, among various person or groups in the society”

It includes all the improvements till Robbins definition, along with it:

  • It also analyses the growth and development of the economy.
  • Due to the inclusion of the time element, the scope of economics is dynamic here.

Economics is a social science which analyses how society maximizes the gains from the limited, scarce resource present.

Aspects, Scope of Economics

Subject matter

In a broad sense, economics is the study of everything related to wealth and value. The generation, distribution and consumption wealth via different material and non-material activities.

Economics is a social science which deals with the wealth generation to satisfy humans using scarce resources.

It also involves markets, mechanism of income and the distribution of wealth and income.

The study of modern economics is divided into two parts-

Microeconomics

This branch of economics is concerned with individual consumers, industries, firms, commodities etc. It is also known as price theory. It assumes that there is full employment, which is also its drawback.

Macroeconomics

This branch focuses on the impact of choice on aggregate level such as the level of employment, national income etc. The main limitation is obvious that it doesn’t consider the individual welfare. It only focuses on the society as a whole.

Science or Art

Both classical and neoclassical has a different opinion about it.

Classical economists say economics is only the study of cause and effect and hence is not the science.

Neoclassical economists along with modern economists consider economics as both science and art.

The scope of economics covers all the central issues faced by society today. Eg- economic growth, poverty, pollution, productivity, monopoly, unemployment, inflation etc.

Economics is a social-science based on problems and it is concerned with all the central problems of our modern world.

Here economists mean to say that no doubt economics is an art as well as science.

Positive or Normative

Positive Science – It creates a relationship between cause and effect, what it is and examining its cause. The aim is to set rules. It is beyond good or bad, or any other value judgements.

Normative Science – It represents what ought to be. It is simply the art of reasoning and opinionated reactions. The aim here is to form ideals. Here we can talk about ethics, value judgements etc.

All the questions related to what should be, what ought to be, what must be etc. fall under this.

Both sciences play important roles in forming the economics. Positive science finds out what it is and why it is and sets the rules. The normative science helps to judge whether it is good or bad i.e. in passing the moral and value judgements.

Basic concepts of economics

economics in india

These are the basic terms, concepts involved in the scope of economics.

  1. Scarcity – Availability of a resource in a limited amount.
  2. Choice – Different alternatives are used to resolve scarcity is an issue and is called choices.
  3. Scale of Preference – There is an assumption under which we consider that all humans are considered to be rational thinker. He will always choose the alternative which yields the maximum satisfaction.
  4. Opportunity cost – When a man chooses one over others, he gives up the satisfaction coming from the other also known as opportunity cost.
Problems associated with any economy
What to produce

There are many options to choose from, this is an issue which arises due to scarce and unequal distribution of resources.

It comes into the picture because of the unequal distribution of demands all over the globe.

The government promotes certain things to be produced in certain locations.

How to produce

This refers to minimizing cost and maximizing production by selection from the list of techniques to produce goods.

The selection of a technique depends on various factors and the product or service to produce. Eg- weather, climatic conditions, budget, production amount, government policies, the technology available etc.

For whom to produce

The goods and services produced in the economy present must consider who are their consumers. A poor or under-developed country’s government will focus on production differently than a developed one.

The goods produced are for the people of which class?

Which demographic group is the target?

The target customer is one of the most important parts to decide when studying the scope of economics.

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