NAME:AYESHA FAROOQ

1ST SEMESTER

LAW DEPARTMENT

ASSIGNMENT:ECONOMICS

ECONOMICS

The term "Economics" is taken from Greek words "Oikos" and "Nomos". 'Oikos' means household and
'Nomos' means management. So Economics means household management, i.e managing a
household, using the limited funds available in the most economical manner possible. In other words it
means managing the desires and aspirations of family through wise allocation of resources (money) in
order to achieve maximum satisfaction in life. It is important to note that the famous Greek
Philosopher Aristotle considered Economics as the art of household management.

QUESTION NO 1

a) ECONOMICS AS A SCIENCE OF WEALTH:

The Wealth Definition is the earliest definition of Economics. This definition was developed by the
Economists who belong to Classical School of Economics.

MAIN CONTRIBUTERS:

. The main contributors are Adam Smith John Stuart Mill, JB Say, Prof. FA Walker

FATHER OF THIS SCHOOL OF THOUGHT IN ECONOMICS :

Adam Smith is the first Economist who defined Economics and hence is regarded as Father of
Economics. According to Adam Smith Economics is a science of Wealth". Economics was regarded as
the science which studied the production and consumption of wealth. He has written a book "an
enquiry into the nature and causes of wealth of nations" popularly known as "Wealth of Nations"
published in 1776

CLASSICAL THINKERS IN SUPPORT OF ADIM SMITH:

The other classical thinkers have supported the views of Adam Smith. As per JS Mill, Economics is "the
practical science of the production and distribution of wealth." According to J.B. Say Economics is "the
science which treats wealth."

Prof. FA Walker defines Economics as a body of knowledge which relates to wealth.

From the above definitions we can say that Economics is a study of how wealth is produced,
distributed and exchanged for consumption. So, the classical definition of Economics points out the
following:

• The main objective of human beings is acquisition of wealth for their comfortable life

• Economics is the science of wealth. It deals with production, distribution and exchange of wealth
• The term wealth means richness or abundance of money.

Ways and means of increasing the wealth of society.

CRITICISM ON CLASSICAL DEFINITION OF ECONOMICS:

The wealth definition of Economics came under a severe criticism from many economists like Rukin,
Carlyle, and Matthew Arnold. According to them, Economics was dubbed as the 'bread-and-butter
science and some called it a pig science. The classical definition of economics is also criticized as a
science that taught selfishness and love of money a dark and a dismal science.

According to critics, the acceptance of Economics as the science of wealth also tended to restrict or
narrow down the scope of the subject unnecessarily. If Economics is defined as the science of wealth,
then a necessary corollary follows that Economics studies the activities of those men and women who
are engaged in the production and consumption of wealth. The people who are not engaged in the
production of material things did not and could not fall within the purview of Economics as such.
Hence the Wealth Definition of Economics is not a complete Definition of Economics.

b) ECONOMICS AS A SCIENCE OF WELFARE :

MAIN CONTRIBUTERS OF THIS SCHOOL OF THOUGHT:

This school of thought is known as Neo Classical definition of economics.

The important economists of Neo-Classical School of Economics are Prof. Alfred Marshall, AC Pigou, E
Cannan, rof. Ely.

ALFERD MARSHALL :

Alfred Marshall was the first economist who lifted the science of Economics from the morass into
which it has fallen towards the close of the 19th century.

He has written a book "Principles of Economics", which was published in the year 1890. He shifted the
emphasis from 'Wealth' to 'Welfare'.

According to him wealth is not end but only a means to an end, the end being human welfare (End
human wants means-resources to satisfy human wants.)

As Marshall puts it, Economics ison the one side a study of wealth; and on the other and more
important side a part of the study of man. He has formulated his definition of economics strictly in
accordance with his ideas of human welfare

AS ALFERD MARSHALL SAID:

Political Economy or Economics is a study of mankind in the ordinary business of life it examines that
part of individual and social action which is most closely connected with the attainment and with the
use of the material requisites of well being"
CRITICISM ON NEO CLASSICAL DEFINITION OF ECONOMICS GIVEN BY ALFRED MARSHALL:The Welfare
definition is criticized by Prof. Lionel Robbins an eminent Economist. The Welfare definition, though it
is superior when compared to Wealth Definition, objected on following reasons

According to Prof. Lionel Robbin the Welfare Definition of Economics includes only material things. It
ignores non-material things from its scope. In fact, the demarcation is not as clear-cut as is assumed
by the economists who advocated Welfare Definition. There are several products in our life which
satisfy our wants though they are in scarce. But these items are not material in any sense of the term.
The services of doctors, lawyers, and teachers are very essential for human welfare. They do not fall
under material things, yet they are in scarce and have highest value.

The science of Economics studies several activities which are hardly conducive to welfare. The
activities of the producers of intoxicants like alcoholic drinks and opium etc. are certainly economic
activities and they are studied by the economists as they satisfy human wants and are concerned with
the production and distribution of scarce commodities life which satisfy our wants though they are in
scarce. But these items are not material in any sense of the term. The services of doctors, lawyers, and
teachers are very essential for human welfare. They do not fall under material things, yet they are in
scarce and have highest value

PART b

Opportunity cost

Opportunity cost is the cost of next best alternative foregone. The amount of goods and services, that
must be sacrificed to obtain more of any one good, is called the opportunity cost of that good.

EXAMPLE:

I am hostelite and i have extra 1000 rupess i have 2 alternatives tp use my extra pocket money

Alternatively 1:to buy books and things i am need of in my hostel.

Alternative 2:to go to a restaurant or cafe with my friends to enjoy

But i will choose the alternative 1 because i am in dire need of books this time so this will be my first
priority now here i have selected option 2 for that i have sacrificed the opportunity to go with my friends
to restaurant this opportunity foregone to avail the benefits of alternative 1 is called opportunity cost