What is economics?

Economics is a social science which deals with human wants and their
satisfaction. It is mainly concerned with the way in which a society chooses to employ
its scarce resources which have alternative uses, for the production of goods for
present and future consumption.
Political economy is another name for economics. “Polis” in Greek means a
State. The early writers used the term “Political Economy” for the management of the
State. A person who runs a family is expected to make the best use of the income
of the household. Similarly, the State is expected to get the maximum benefit for the
society. Hence the term “Political Economy”.
The existence of human wants is the starting point of all economic activity in
the world. Unless we make efforts, we cannot satisfy wants. Hence, wants, efforts
and satisfaction form the circle of economics. We may say economics is the science
of wants. But in the real world, the means which satisfy our wants are limited, that
is, there is scarcity of the means which satisfy our wants. Time and money are
limited. And land, labour and capital which are used in production are limited. Though
science has increased our resources, our wants have also increased. We may satisfy
some wants now. But soon, new wants appear. But all our wants cannot be satisfied
because means are limited.
We study economics because there is scarcity of many goods we want.
This problem is common to the individual as well as the State. That is why we say
Economics is the science of scarcity. And scarcity is the basic fact of life.
Our wants are unlimited but means are limited. This leads to choicemaking.
If there is unlimited supply of goods which satisfy our wants, the problem of choice
will not arise. It is true that we have many wants. But all wants are not of equal
importance. So we choose the more important and the more urgent wants. So choice
is the essence of economic activity. We may also say that economics is the science
of choice. Of course, all goods we want are not scarce. There are certain things like
air and sunshine which are available in abundance. Though they are very essential
for our life, we do not pay any price for them. They are free goods and they are not
very important for our study. But many things we want are scarce and we have to
pay a price for them. So, in economics, we study how prices of different things are
determined. We may also say that economics is a science that deals with pricing
process.
Modern economy is a monetary economy. Prices are paid in money. So
money plays an important role in the economic life of a society. It is used for buying
and selling of goods, for payment of rent, wages, interest and so on. In economics,
we study about the role of money in the affairs of mankind.
We shall now sum up our discussion about the nature of economics.
Economics is a social science which studies about human wants and their
satisfaction. Human wants are unlimited. So scarcity is the fundamental fact of life.
As all wants are not of equal importance, this leads to choice. Economics is the
science of choice. As there is scarcity of goods, we have to pay a price for them.
So, economics studies about the pricing process. And, as prices are paid in money,
we study about the part played by money in the economic life of a society. We study
how people get and spend money, how they earn a living and how it affects their way
of life and so on. All the scarce goods which satisfy our wants are known as wealth.
So, in economics, we study about the production of wealth, exchange of wealth,
distribution of wealth and consumption of wealth. As wealth is produced to promote
human welfare, we study the relationship between wealth and welfare.