Economics refers to the study of human behavior where an individual or the nation as a whole is required to make choices to employ limited resources, having alternative uses, into the production, distribution & consumption of goods and services to achieve the maximum output over a period of time.
With the publication of Adam Smith’s, ‘An Inquiry into the nature and causes of wealth of nations’ in the year 1776, the study of economics came into the picture. The word economy is derived from the Greek words named ‘oikou’ which means a house and ‘nomos’ which means to manage. Therefore, economics is managing the households by ensuring that there is an optimum utilization of resources. The economics is the science that involves the study of individuals, governments, business enterprises or the nation as a whole where the mentioned groups, individually or collectively, are required to allocate the scarce resource into the production, distribution & consumption of goods & services so as the achieve the maximum level of output. In other words we can say that the economics focuses on the optimum utilization of resources as the resources are available in a limited quantity. Moreover economics also involves framing policies and procedures that can help the humans to achieve the maximum efficiency in the production.
Branches of Economics:
The economics was further divided into two categories in 1933 by Sir Ragnar Frisch. He categorized the economics into following two categories:
Microeconomics is the study of small groups of society including the study of the decision making of the individuals such as consumers, firms, households etc. in allocating of resources. The approach of microeconomics is both practical as well as theoretical. It focuses on solving the three major problems of an economy i.e., what to produce, how to produce and for whom to produce.
Macroeconomics is the study of the larger groups as it involves study of overall national and international economy. It focuses on the study of problem of employment, GDP, investment, government fiscal & monetary policy, consumption, economic growth, level of inflation, recessions, depressions etc.
Importance of economics:
The study of economics covers both practical as well as theoretical aspect. Let’s see some of the points which describe the importance of economics:
1.Overall knowledge of economy:
It provides an overall view of the national & international economy and helps in determining the reasons of poverty, illiteracy, unemployment and other important factors that hampers the economic growth.
2. Allocation of resources:
The subject economics ensures that the resources available are distributed among the individuals or the organizations in such a manner that there is an optimum utilization of resources.
The forecast about the future economic conditions helps the decision maker in getting an idea regarding possible outcomes and take the decisions accordingly.
Economics is one of the important areas of the society which can help in improving the living standards of the people living in the society thereby making it a better place to live. It is not just about the money rather it is regarding weighting of the different alternatives available.