Meaning and concept of Economics

Economics is the study of the activities of human beings which they perform for acquiring the limited or scarce resources for the satisfaction of their unlimited wants with their limited means that is wealth.

Economics is derived from two Greek words, Oikos means domestic and Nemein means management. Both the words collectively mean Management of home affairs. As we have unlimited wants but the mean that is the wealth to satisfy these wants is limited.

So, we must spend our limited wealth in such a way to get maximum satisfaction.  Economics basically deals with the following points:

  1. Free goods: These are the goods for which we don’t pay anything. These are provided to us by the nature free of cost like sunlight, air, water etc.
      • Economic goods: These are the goods for which we have to pay a price. These goods are scarce as their demand is more than their supply. So, we have to make choice. Like milk is scarce, it is having different uses, we have to decide for which purpose we want to use it.
      • Economic Problem: As human wants are unlimited but the means to satisfy these wants are limited so everyone has to make choice of specific wants. This problem of choice is the problem of economics.  It is also called economic problem.
      • Economic activity: To solve the economic problem there is the need of economic activity.  It can be divided into 4 parts; consumption, production, exchange and distribution. Consumption is the use of utility. For example, if you are ill then taking medicine is an economic activity. Production is the creation of utility. For example, making the medicine by producer is called production. For production there is the need of factors of production like, land, labour, capital, organisation and entrepreneur. Exchange is related to the sale and purchase of goods and services. Distribution is the economic activity related to the distribution of total production among the factors of production. Like A landlord gets rent, labour gets wages, capitalist gets interest and entrepreneur gets profit.

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