A consumer (a person who buys goods to satisfy his wants), a producer (a person who produces goods) service holder (a person who is in a job to earn either wages or salaries to buy goods) a service provider (a person who provides service to society to earn money). All the persons are buy to earn in different activities, which are called economic activity.
Economics is the study of how human being make choices to allocate scarce resources to satisfy their unlimited wants, in such a manner that consumer can maximize their satisfaction, producer can maximize the profits and society maximize his social welfare.
Activities are of 2 types
- Non- Economic Activities :These are the activities which are not concerned with money and wealth like:-
(i) Social Activities : Such as organizing cultural activities, get together, birthday parties.
(ii) Religious Activities : Such as going to temple, gurudwara, mosque or church to workship God.
(iii) Political Activities : Various activities performed by different political parties.
(iv) Charitable Activities : Such as blood donation, free medical aids, or helping poor and handicapped
(v) Personal Activities : Such as love and affection towards the children.
- Economic Activities : – Activity which is bassed on or related to the use of scarce resources for the satisfaction of human wants. Non-economic activities become economic activities when it involve any money aspect to earn out of them. Economic activities are of 5 kinds.
(i) Production : Production is that economic activity which is concerned with increasing the value of goods and services. It refers to the transformation of inputs into outputs with the help of technology.
(ii) Consumption : Consumption is the economic activity which is concerned with the goods and services for the direct satisfaction of industrial and collective wants. There would have been no production, if there would have been no consumption. E.g. eating bread, drinking milk.
(iii) Investment : Investment is that economic activity which is concerned with production of capital goods for further production of goods and services. Investment indirectly satisfies the human wants. E.g. production of printing press machine to produce newspaper, magzmestic.
(iv) Exchange : Exchange is the economic activity which is concerned with sale and purchase of goods and services. Buying and selling is mostly done in terms of money and price.
(v) Distribution : Distribution is the economic activity, which deals with the determination of prices of factors of production. Distribution is the study to know how the national income or total income arising from what has been produced in the country is distributed
DIFFERENT DEFINITION OF ECONOMICS
- Wealth Definition – By Adim Smith ; Economics is an enquiry into the factors that determines the wealth of the country.
- Material Welfare Definition–By Marshal; Economics is the study of mankind in the ordinary business of life. It examines that part of individual and social actions which is concerned with attainment and use of material requests of well-being.
- Scarcity Definition – By Lord Robbins; Economics is a science that studies human behavior as a relationship between ends and scare means which have alternative uses.
NATURE OF ECONOMICS :
Following are the arguments in the favour of economics as a science.
- Systematised Study – The study of economics is systematically divided into consumption, production, exchange and distribution of wealth and hence which have their own laws and theories.
- Scientific Laws – Economics is a science, because its laws are universally true. Different laws like law of Demand law of supply are applicable to all types of economics.
- Causes and Effect Relationships – Economics laws establishes causes and effect relationship e.g. law of demand, when there is a change in the prices (cause), it will lead to a change in demand (effect).
- Verification of Laws – Economics laws are also open to clarification. These can be verified through any empirical investigation.
ECONOMICS – AS A POSITIVE SCIENCE
A positive science is one which makes a real description of an activity. Positive economics deals with what is or how he economic problem f acing a society are actually solved. Some e.g. are :
- India is the second largest populated country in the world.
- Prices have been rising in India.
ECONOMICS – AS A NORMATIVE SCIENCE
Normative economics deals with what ought to be, or how the economic problem should be solved. The statement that make assessment of the activity and other suggestions are called normative statements. The part of the economics which deals with normative statements is called normative economics e.g. are :
- India should not take leans from the foreign countries.
- Free education should be given to the poor.
ECONOMICS – AS AN ART
Art is a practical application of knowledge for achieving some different aims. It helps in solution of different problems. Science lays down principle while art puts these principles into practice. Economics is an art as it gives practical guidelines in solution to the various economic problem. Thus, economics is both science as well as art.