Why is Economics important? Scope of Economics

scope of economics
February 3, 2021
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Table of Contents

Introduction

Economics has evolved over centuries due to the scarcity of resources. Therefore, To understand the scope, we need to understand why we need it. The aim is to maximize the use of resources.

This term is derived from economy and science. Thus, It means the science of the economy or proper utilization of resources.

Firstly, we must see the opportunities. Check out our article on Career Options in India after Bachelor in Economics to know more.

Top Options

opportunities in economics
  • Chegg subject expert:

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

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

  • Teaching professions:

Schools and colleges teach economics from very basics. The scope of economics in this field is vast.

  • Indian Economics Services:

To land a government job you can give 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. They also study on what factors these depend. Thus, This helps businesses in identifying the target customers and ways to advertise their products.

Eg- BLS predicted that by 2028 the employment in this field will increase by 20%.

  • Credit Analyst:

Today, many companies need credit analysts. He analyzes the credit score. This help them in getting loans and making investments.

The median salary earned by credit analyst in May 2019 was $73,650.

  • Business Writer:

They write 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.

  • Work as a Consultant:

They study market trends with high research skills.  Also, They analyze different market trends and help organizations in promoting their businesses.

  • Banking:

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

Understand the nature and scope

“Science of wealth” this is what people used to defined economy.  And, They considered only the science which deals with material wealth as the scope. All the services were out of the scope of economics.

Classical economists

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

Due to some points, people highly criticized classical economics:

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

The Neo-Classical view

Under this viewpoint, it is defined as the science of material welfare.

Alfred Marshall, led this. Hence, It helped economics gain a respectable place in the social sciences.

Wealth, here, is regarded 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.

  • Firstly, the use of material activities narrows the scope. There are many other activities which help promote human welfare.
  • There are many activities like tobacco which are material activities and promotes the economy but don’t promote human welfare.
  • The use of word welfare is in itself very subjective.

To him, the scarcity of resources is the reason for economics.

Scarcity and choice definition.

It is a human science which involves the best use of scarce resources so that the society is satisfied. But, with the scarcity of resources, the various are alternatives to the resource.

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

Due to some points, people criticize this theory as well:

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

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

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

It is a social science which analyses how society maximizes the gains from the limited resources present.

Scope of Economics

Subject matter

This is the study of everything related to wealth and value. Also, the generation and consumption of wealth via different activities. It is a social science which deals with the wealth generation to satisfy humans using scarce resources. Hence, it also involves markets, mechanism of income and the distribution of wealth and income.

The study is divided into two parts-

Microeconomics

This 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 focuses on the impact of choice on the whole level. Thus, The limitation is obvious that it doesn’t consider individual welfare. It only focuses on society as a whole.

Science or Art

Both have a different opinion about it. One say economics is only the study of cause and effect and hence is not the science. Others consider it as both science and art.

The scope covers all the central issues faced by society. Eg- economic growth, poverty, etc. It 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 economics is an art as well as science.

Positive or Normative
Positive Science –

It teaches 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 factors.

Normative Science –

It represents what ought to be. It is simply the art of reasoning and reactions. The aim here is to form ideals. Here we can talk about ethics.

Thus, 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. Hence, 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.

Basic concepts 

economics in india

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

Scarcity –

Availability of a resource in a limited amount.

Choice –

Different alternatives are used to resolve scarcity is an issue and is called choices.

Scale of Preference –

Here we consider that all humans are rational thinker. Thus, He will always choose the alternative which yields the maximum satisfaction.

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 

What to produce –

There are many options to choose from, this is an issue that arises due to scarce and unequal distribution of resources. It comes into the picture because of the unequal distribution of demands. Also, the government promotes certain things to be produced in certain locations.

How to produce –

This refers to minimizing cost and maximizing production by selection of goods. Hence, The selection of a technique depends on various factors and the product to produce. Eg- weather, climatic conditions, budget, production amount, etc.

For whom to produce –

The goods and services produced must consider their consumers. Thus, A poor country will focus on production differently than a developed one.

For which class do the producers produce for?

Which group is the target?

The target customer is one part to decide when studying the scope of economics.

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