UNIT 1 CENTRAL PROBLEMS
Structure 1.0 1.1 1.2 1.3 1.4 1.5 Objectives Introduction Defining Economics Unlimited wants and limited means Scarcity and choice The problem of choice: an illustration 1.5.1 A Digression: Meaning of Goods in Economics 1.5.2 Another digression
1.6 1.7 1.8 1.9 1.10
Positive versus normative economics Let us sum up Some key words Some useful books Answers or hints to check your progress exercises
This unit would enable you to understand
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what does constitute an economic problem to an individual and to the society what does constitute wants and the means to satisfy them what is Production Possibilities Curve (PPC) how PPC can be used to illustrate the problem of choice in Economics the distinction between Positive Economics and Normative Economics with illustrations.
The purpose of this unit is to define the subject matter of economics, highlighting what constitute the central (essential) problems of an economy. The normal tendency is to start with a definition. However, in introducing the subject called economics, starting with a definition is an extremely difficult task, if not impossible, since there exists no single accepted definition. You will be surprised if we tell you that there are as many definitions of economics as there are number of economists in this world. Each will claim that his or her definition is superior and more relevant and appropriate than that of others. Hence there is a dilemma as well as an ego problem. However, to do justice to the beginner students who will be reading our unit in economics, we have to start with an analysis of what the subject of economics is all about. It is in this context that we choose Lionel Robbin’s definition of economics in preference to Adam Smith’s, Alfred Marshall’s or J.M. Keynes’.
1.2 DEFINING ECONOMICS.
According to Lionel Robbins, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses” [An Essay On The Nature And Significance Of Economic Science 1933]. What does Robbins stress in his definition of economics? Firstly, that economics as a subject deals with human behaviour. A critic can say that a study of human behaviour is not a prerogative of economics only. There are other social sciences, like sociology, psychology, political science etc., which also deal with human behaviour. Like economics these subjects also deal with the behaviour of people in their individual
Introduction to Economics
as well as. Economics, however, deals with the behaviour of people in the pursuit of economic activities. As one author puts it, “What distinguishes economics from the other social sciences, however, is the manner in which it studies people, and Robbins’ statement makes this clear. Economics interprets human behaviour as the conscious attainment of objectives, of ends”.
1.3 UNLIMITED WANTS AND LIMITED MEANS
The starting point of economics is human wants, needs and desires. Human beings living in any society at any stage of historical development of that society have wants and needs. Some of these needs like the need for food, clothing, shelter are biological in character, needed to sustain life in this universe. The origin of needs is, therefore, biological. However, the majority of human needs arise from the fact that people live together in a society. It is the existence of human society, which accounts for a large chunk of our needs. Such needs are determined by a complex set of factors called the culture of a given society. Even biological needs (like food) are also influenced by the culture of the society at any particular stage of historical development of that society. Hence, we find that the origin of needs is the biological necessity of sustaining life, while the existence of human society would determine its form, nature, and structure. One important characteristic of...
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