Nature and Scope of Economics Defined!

Economics is characterized as a social science dealing with goods and services, production, distribution, and consumption. Economic studies evolved in the 19th century and became one of today’s most critical studies. Economics plays a key role in the successful running of all companies, be it small, big, or even a government. No organization will succeed without applying economic principles. There is a wide and varied analysis of the economy. The existence and scale of the economy depend on economic agents’ interaction and the workings of the economy. Let’s explore in-depth the essence and scale of the economy. This will help us understand the nature and scope of economics.

Nature and Scope of Economics

To explain economics in the simplest ways, we can simply say it is the decision pertaining to allocating limited resources to productive uses so as to derive maximum satisfaction or gains. The choices we make concerning the use of scarce resources that have alternative uses, to satisfy our most pressing infinite wants and distribute them among ourselves, are economic. It is even used in our day-to-day life. So, it is important to understand the nature and scope of economics in detail. Find these details below.

Nature of Economics

The essence of economics addresses the issue of whether economics belongs in the science or art group. Different economists have argued in favor of science, although some have inclined toward the arts. We have given both theories below. Read them and decide for yourself.

What is the Scope of Physiotherapy in India?

1. Economics is a science

Before we can consider anything as science, we first need to understand what science is about. Science is a systematic branch of knowledge that analyzes the cause-and-effect relationship between economic agents. In any science, facts and figures are collected and analyzed, and a conclusion is derived. Economics helps in using various sciences, such as mathematics, statistics, etc., to identify the relationship between price, demand, supply, and other economic factors.

Positive Economics:

Positive science studies, but do not provide a valuable evaluation of the relationship between two variables. It states what it is. The facts of the whole economy are discussed.

Normative Science:

Economics passes value evaluation as a normative science – ‘what’ should be. It focuses on economic objectives and strategies to achieve these objectives.

Economics is considered a social science because:

• It involves a systematic collection of facts and figures
• Like science, it is based on the formulation of theories and laws
• It deals with the cause-and-effect relationship

<<<ALSO READ: SCOPE OF BUSINESS ECONOMICS>>>

2. Economics is an art

Knowledge is science, and action is art. Economics is a study that expresses how things are to be done to achieve the desired results. Various branches that provide general rules and laws that are capable of solving different problems of society fall under the branch of economics. A few of these are production, distribution, consumption, and economics. These theories are used to solve various economic problems in society. Therefore, it is said, along with being a social science, economics is also an art.

Scope of Economics

To solve diverse economic problems in society, economists use different economic theories. It is quite vast in its applicability. Economic laws come into effect, from small companies to global corporations. Under two subheads, Microeconomics and Macroeconomics, the spectrum of economics can be understood. Both of these fall under the scope of economics. Let’s have a thorough discussion of these:

1. Microeconomics

This is that part of economics whose subject matter for the study is individual units like a consumer, a household, a firm, an industry, etc. It analyses how the decisions on the allocation of resources, which are limited in nature, are made by the market players. It studies the behavior, price of goods, and actions of companies, factor pricing, etc. Microeconomics studies economic development and the relationship between individual industries. It has the following features:

• Elasticity – It calculates the ratio of the change in the proportion of one variable to the other. For instance, the income elasticity of demand, the price elasticity of demand, the price elasticity of supply, etc.
• Theory of Production – It comprises an efficient conversion of inputs into outputs. For instance, packaging, shipping, storing, and manufacturing.
• Cost of Production – Using this theory, the price of an object is determined by the price of the resources.
• Monopoly – As per this theory, the dominance of a single entity is studied in a particular field.
• Oligopoly – It corresponds to the dominance of small entities in a market.

<<<ALSO READ: SCOPE OF COMMUNITY HEALTH NURSING>>>

2. Macroeconomics

This branch of economics studies the entire economy, like total savings, level of output, total consumption, total investment, etc, instead of individual units. In simple words, we can say that it is the study of aggregates and averages. The economic environment is analyzed as a whole in which firms, households, consumers, and governments make decisions. Areas like national income, general price level, the balance of trade and balance of payment, level of employment, level of savings, and investment are covered under macroeconomics. Its characteristics are:

• Growth – Factors that explain economic growth, such as the increase in output per capita of a country over a long period of time, are studied under this characteristic.
• Business Cycle – After the Great Depression of the 1930s, this theory emerged. It promotes the central bank and government’s role in formulating monetary and fiscal policies for monitoring business cycle results.
• Unemployment – The unemployment rate caused by various factors like rising wages, a shortfall in vacancies, etc, is measured under this.
• Inflation and Deflation – Inflation corresponds to an increase in the price of a commodity, while deflation corresponds to a decrease in the price of a commodity. These indicators are helpful to assess the status of the economy of a country.

Types of Horticulture Jobs in India

The main difference between microeconomics and macroeconomics lies in the scale of study. We can say that in microeconomics, more importance is given to the determination of price, whereas macroeconomics is concerned with the determination of income of the economy as a whole. All that said, microeconomics and macroeconomics are complementary to each other. They are both aimed at maximizing the welfare of the economy as a whole.

Hope you have understood the scope of economics with this article. If you like this content, make sure to subscribe to our YouTube channel.