In: Economics

What are the scope of Economics?

What is scope of Economics. What is Macro Economics. What is Micro Economics. 


Expert Solution

Meaning of Economics - 

Economics is a very important subject of study in modern times. Although it has a history of only about 200 years but its subject matter had always been studied in some form or the other in earlier times also. In the modern times, with increasing prosperity its importance has further increased and we can see the application of its laws and principles in our lives. 

The first complete book on economics was the book titled 'An Enquiry into the Nature and Causes of the Wealth of the Nations' written by Adam Smith who was a professor of logic and moral philosophy at the University of Glasgow. This book was first published in 1776. Tt is due to this reason that he is called the father of Economics. 

According to Adam Smith 

' Economics is the study of nature and causes of wealth of nations. '

The scope of Economics and its subject matter has been changing from time to time and its scope is much wider today as compared to what it was in the past. In a wider sense, apart from the principles and theories, trade, public finance, demography and population studies, currency and banking money and financial markets, transport development problems etc, all come under economics. However, the core theme of Economics remains as principles of Economics.

Even these principles have been divided into-

(1)- Macro economics.

(2)- Micro Economics. 


(1)- Macro Economics - 

Macro economics is the study of economic in which a group or a system as a whole is studied as one unit. For example the study of a whole economic system of a country will be termed as microeconomics. Accordingly, the study of economy wide problems like- unemployment, inflation, economic backwardness, boom and depression, national income National Savings and investment are considered as macroeconomic problems.

(2)- Micro Economics -

It is a study of individual units in an economy. Under this we make a study of individual consumer, producer, seller or the market for a particular commodity, and try to find out as to how do these individual units find their equilibrium. In micro economics, we mostly use economic statistics although sometime dynamics can also be used. For example, at a given point of time the relationship between price and quantity will be called a static relationship but if present demand is based on expected price of future then we will call it a dynamic relationship. 

There are four important sections of micro economics-

(a) - Consumption-

Under micro economics we first study the process of consumption and its related problems. We try to find answers to the questions like why consumption is done? How it is done? How does it change and how does the consumer find his equilibrium with his given income?

(b) - Production

Under production we first find out the meaning of production, the factors of production and the laws of production. We also study the concept of cost and how does it change with change of outcome.

(c) - Exchange

Exchange seeks to explain the process of transaction between producers and customers. The nature of market and its various forms as well as market price determination under different market conditions is also explain under exchange.

(d) - Distribution

The theme of distribution is to explain the distribution of income between different factors of production. Hence we analyse the process of determination of rent, wages, interest and profit under distribution.


Scope of Economics can be divided into two parts-

(1)- Macro Economics

(2)- Micro Economics 


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