UNIT 1 
BASIC CONCEPTS OF ECONOMICS AND ALLOCATION OF RESOURCES

CHAPTER 1 

BASIC CONCEPTS OF ECONOMICS AND ALLOCATION OF RESOURCES

 Introduction:

The word “economics” is originated from the Greek word “oeconomicus”. In Greek, “oeco” means household and “nomicus” means study. So, it is the study of household management. According to Greek philosopher Xenophon, “Economics is the science of household management.” But in view of Aristotle, “Economics is not only the science of household management but also the science of exchange.” He regarded economics as an important pillar of politics. The mercantilists, who were leaders of economic thought, took wealth and foreign trade as the base of economics. There was a slogan “more gold, more wealth and more power”. The motive of them to make economics as a study of wealth from the angle of the state. During the mid-18th century, a group of economists was appeared known as physiocratic school. They emphasized on the development of agriculture sector. They said that human satisfaction can be increased through the natural law only.

Before 18th century, different philosophers and thinkers at different times had defined and applied economics differently. At that time, economists were treated as religion. But after the publication of Adam Smith’s book “An enquiry into the nature and causes of wealth of nations” in 1776 A.D., economics got its independent identity. Since then, economics has become a separate subject of study.  
Different economists have defined economics differently. Regarding this, Barbara Wotton has said that “whenever six economists are gathered there are seven opinions”. Likewise, Jacob Viner has said that “Economics is what Economists do.” So, at present, there are various definitions of economics. Among these definitions, the definitions of economics can be classified into three parts:

Wealth definition/ Adam Smith’s definition/ Classical definition (1776-1890)

Welfare definition/ Marshall’s definition/ Neo-Classical definition (1890-1932)

Scarcity and choice definition/ Robbins’ definition/ Modern definition(1932-onwards)

Chapter 1 Part 1