What is Economics ?
The term ‘Economics’ owes its origin to the Greek word ‘Oikonomia’ which means ‘household’. Till 19th century, Economics was known as ‘Political Economy.’ The book named ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ (1776) usually abbreviated as ‘The Wealth of Nations’, by Adam Smith is considered as the first modern work of Economics.
Before we start with the meaning of Business Economics, it is important for us to understand what Economics is about. For this, consider the following situation:
It is your birthday and your mother gives you ` 1000 as birthday gift. You are free to spend the money as you like. What will you do? You have many options before you, such as:
Option 1 : You can give a party to your friends and spend the whole money on them.
It is your birthday and your mother gives you ` 1000 as birthday gift. You are free to spend the money as you like. What will you do? You have many options before you, such as:
Option 1 : You can give a party to your friends and spend the whole money on them.
Option 2 : You can buy yourself a dress for ` 1000.
Option 3 : You can go for a movie and eat in a restaurant of your choice.
Option 3 : You can go for a movie and eat in a restaurant of your choice.
Option 4 : You can buy yourself a book and save the rest of the money.
What do you notice? You have many options before you. Given a choice, you would like to spend not only on your friends, but would also like to go for a movie, eat in a restaurant, buy a dress and a book and save some money. However, you cannot have all of them at the same time. Why? Because you have only `1000 with you. Had your mother given you ` 2000, you might have satisfied more of your desires. But, she has not. Now, you find yourself in a dilemma as to which of the above options to choose. You will have to go for one option or a combination of one or more options. What do you do? You evaluate the various alternatives and choose the one that gives you the greatest satisfaction. Similar dilemma is faced by every individual, every society and every country in this world. Life is like that. Since we cannot have everything we want with the resources we have, we are forever forced to make choices. Therefore, we choose to satisfy only some of our wants leaving many other wants unsatisfied.
What do you notice? You have many options before you. Given a choice, you would like to spend not only on your friends, but would also like to go for a movie, eat in a restaurant, buy a dress and a book and save some money. However, you cannot have all of them at the same time. Why? Because you have only `1000 with you. Had your mother given you ` 2000, you might have satisfied more of your desires. But, she has not. Now, you find yourself in a dilemma as to which of the above options to choose. You will have to go for one option or a combination of one or more options. What do you do? You evaluate the various alternatives and choose the one that gives you the greatest satisfaction. Similar dilemma is faced by every individual, every society and every country in this world. Life is like that. Since we cannot have everything we want with the resources we have, we are forever forced to make choices. Therefore, we choose to satisfy only some of our wants leaving many other wants unsatisfied.
These two fundamental facts that:
(i)
‘Human
beings have unlimited wants’; and
(ii) The means to satisfy these unlimited wants are relatively scarce 'form the subject matter of Economics.
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