The analysis of the economic environment requires the knowledge of economic decision making and hence the study of “Economics” is significant.
1. Wealth Definition
Adam Smith defined “Economics as a science which inquired into the nature and cause of wealth of Nations”.
- Economics is a science of study of wealth only;
- It deals with production, distribution and consumption;
- This wealth centered definition deals with the causes behind the creation of wealth, and
- It only considers material wealth.
- Wealth is of no use unless it satisfies human wants.
- This definition is not of much importance to man and welfare.
2. Welfare Definition
According to Alfred Marshall “Economics is the study of man in the ordinary business of life”. It examines how a person gets his income and how he invests it. Thus on one side it is a study of wealth and on the other most important side, it is a study of well being.
- Economics is a study of those activities that are concerned with material welfare of man.
- Economics deals with the study of man in ordinary business of life. The study enquires how an individual gets his income and how he uses it.
- Economics is the study of personal and social activities concerned with material aspects of well being.
- Marshall emphasized on definition of material welfare. Herein lies the distinction with Adam Smith’s definition, which is wealth centric.
3. Scarcity Definition
This definition was put forward by Robbins. According to him “Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
- Human wants are unlimited
- Alternative use of scarce resources
- Efficient use of scarce resources
- Need for optimisation
4. Growth Oriented definition
This definition was introduced by Paul. A. Samuelson. According to the definition “Economics is the study of how man and society choose with or without the use of money to employ the scarce productive resources, which have alternative uses, to produce various commodities over time and distributing them for consumption, how or in the future among various person or groups in society.” It analyses costs and benefits of improving patters of resource allocation.