Very Short Question Answer

1. What do you mean by Economics?
Economics is that branch of knowledge, which studies the economic activities of human beings.

2. What is the definition of economics as given by Adam Smith?
According to Adam Smith, “Economics is an Enquiry into the Nature and Causes of the Wealth of Nations.”

3. What is the definition of Economics as given by Marshall?
According to Marshall, “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 use of material requisites of well-being.”

4. Name the economist who defined Economics in term of scarcity and choice.

Lord Robbins is the economist who defined economics in terms of scarcity and choice.

5. What is the subject matter of economics as given by Robbins?

According to Robbins, the subject matter of economics includes all those activities of human beings which satisfy their unlimited wants with the help of limited means.

6. What is the definition of economics as given by Robbins?

According to Robbins, “Economics is a science that studies human behaviour as a relationship between ends and scarce means which have alternative uses .”

7. What is the name of book written by Robbins?
The name of book written by Robbins is “An Essay on the Nature and Significance of Economic Science.”

8. What is microeconomics?
Microeconomics is the study of the action of individuals and small group of individuals such as individuals, households, firms, industries, etc.

9. Mention uses (importance) of microeconomics. The main uses of microeconomics are as follows:
i It is helpful to understand the working of the economy.
ii. It is helpful to formulate of economic policies.
ii. It is helpful in allocation of resources.
iv. It is helpful in efficient allocation of resources
v. It is helpful to study of human behavior

Short Question Answer

1. Explain “Economics is the Science wealth

Adam’ smith, who is also known as the father of economics, defined economics as “An inquiry into the nature and causes of wealth of nations” in his book “Wealth of Nations’ ‘ published in 1776 A.D. His definition was supported by many earlier economists like J.B. Say, J.S. Mill, F.A. Walker and T.R. Malthus. These economists have also defined economics as the study of wealth. Since Adam Smith and his followers have given importance to the study of wealth, the definition given by these economists is also known as the “Wealth Definition of Economics’ ‘. The economists who fully supported and followed the economic ideas of Adam Smith are called classical economists.

Features/Characteristics/ Main Ideas of Adam Smith’ Definition

The main features or main characteristics or main ideas of Adam Smith’s definition of economics are as follows:

  • Study of wealth: According to Adam Smith, economics is the study of wealth, which deals with production, consumption exchange and distribution of wealth.
  • Secondary place to the study of man: Adem Smith and his followers have given primary importance to the study of wealth and secondary importance to the study of man. It means that the classical economists have regarded man as the rneans and wealth as the ends.
  • Meaning of Wealth: This definition has included only materials goods like house, furniture, vehicles, gold, etc. in the definition of wealth. The non material goods like services of teacher, lawyers, doctor, etc. have been excluded from the definition of wealth.
  • Study of economic man: According to this definition, economics studies only economic man whose objective is only to earn more and more wealth.
  • Investigation of causes of wealth of nation: This definition shows that economics deals only with the enquiry into causes behind the creation of wealth. According to this definition, the source of wealth of nation is the employed labour whose productivity can be increased through division of labour.

2. Discuss the main points or ideas or features of Marshall’s definition of economics. [5] [HSEB 2072, Set C

Alfred Marshall, who is also known as the neoclassical economists, was greatly influenced by the criticisms against the wealth definition of economics or Adam Smith’s definition of economics. He shifted the definition of economics from wealth centered to welfare centered. In the words of Marshall, “Economics is a study of man in the ordinary business of life. In enquiries how he gets his income and how he uses it. Thus it is on the one side, the study of wealth and on the other and more important side, a part of study of man”. From this definition, it is clear that economics is about study of both wealth and human welfare but its main focus is study of human welfare. The features or characteristics or main ideas of Marshal’s definition of economics are as follows:

  • Study of human: According to Alfred Marshall, the subject matter of economics is mankind and his welfare but not wealth.
  • Study of human economic activities: Economics studies economics activities of man. Man performs social, religious and economic activities. Economics studies only economic activities concerned with the material welfare of man.
  • Study of material-welfare: The main emphasis of this definition is on material welfare. The study of non-material welfare is outside the scope of economics. iv. Normative science: According to Marshall, economics is the normative science. As a normative science, economics studies what should be done to promote the material welfare of man.

3. Discuss the main features of Robbins’ definition of economics.

Lionel Robbins, a British economist, criticized Marshall’s definition of [5] economics and gave his own definition in his book ‘An Essay on the Nature and Significance of Economic Science’ published in 1932 AD. In his own words, “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” This definition is regarded as the one of the most popular definitions of economics. It is also known as the scarcity definition of economics. The main features or ideas of Robbins’s definition are as follows:

  • Unlimited human wants: The Robbins’ definition of economics states that human wants are unlimited. If one want is satisfied, another want crops up. Thus, different wants appear one after another.
  • Limited resources: All the resources which satisfy human wants are limited. This is known as the scarcity of resources. Any resource is considered as scarce if its supply is less than demand.
  • Alternative use of resources: All the scare resources have alternative uses. It means that scarce resources can be put to a number of uses. For example, a peace of land can be used for either cultivation, or for building a house or building a factory shed, etc.
  • Problem of choice: According to Robbins, economics deals with how a man makes use of scarce resources having alternative uses for the satisfaction of his unlimited wants. Since, this involves choice making economics is also called as a science of choice.

4. Explain the concept of normative economics. [5]

 Normative economics is related with the explanation of the economic events as they should be ought to be. It means that it is related to the value judgement. It gives the judgement whether the thing is right or wrong. It evaluates economic events and prescribes solutions for it. In other words, it explains the wrongness and rightness of economic events. For example, if there is poverty and unemployment in the economy, economics not only explains the situation and causes of it but also provides measures to reduce the poverty and unemployment. In this way, economics is the normative science.

Neo-classical economist like Alfred Marshal, A.C. Pigou, etc. considered economics as the normative science. The meaning of normative economics can be cleared by the following points:

Normative economics is based on the ethics and deals with idealistic situation.

It cannot be verified with the actual data.

It expresses what ought to be.

It gives prescription to solve economic problems

5. Explain the concept of micro economics. [5]

Microeconomics is defined as the branch of economics which deals with small individual parts of an economy. In other words, microeconomics is the study of economics action of the individuals and small group of individuals. It explains how and why these units make decisions regarding consumption, production, exchange and distribution. Under the microeconomics, we study various topics like demand, supply, cost, production, exchange, distribution, etc. Microeconomics is also known as the price theory because is also known as the price theory because it is primarily concerned with the determination of price of the commodities.

The features of microeconomics are as follows:

  • It is individualistic economics.
  • it is applicable only in the market economies.
  • It is based on the objective of full employment in the economy.
  • It is also called price theory.Its principal variables are individual demand and supply, output of individual firm, and so on.

6. Explain the concept of macro economics.[5]

Macroeconomics is defined as the branch of economics which deals with the economy as a whole. In other words, macroeconomics is the study of very large, economy-wide aggregate variables like national income, economic growth, price level, total saving, total consumption, total investment, etc.

Therefore, it is also known as the aggregative economics. Macroeconomics is also known as the theory of income and employment because its primary concern of study is the determination of equilibrium national income and employment. It regarded as the policy science and it is also normative science. This is relatively new branch of economics and developed after the Keynesian General Theory in 1936.

The features of macroeconomics are as follows:

  • It is aggregative economics.
  • It is concerned with the behaviour of the economy as whole.
  • It is policy science and more normative.
  • It is also called theory of income and employment.
  • It principal variables are national income, total consumption, total investment, aggregate demand, aggregate supply, total saving, price level, etc.

Long Question Answer

1. Critically explain Adam Smith’s definition of economics. OR “Economics is the Science of Wealth”. Discuss. Definition of Economics Given by Adam Smith (Wealth Definition! Classical Definition,

Adam’ smith, who is also known as the father of economics, defined economics as “An inquiry into the nature and causes of wealth of nations” in his book “Wealth of Nations” published in 1776 A.D. His definition was supported by many earlier economists like J.B. Say, J.S. Mill, F.A. Walker and T.R. Malthus. These economists have also defined economics as the study of wealth. Since Adam Smith and his followers have given importance to the study of wealth, the definition given by these economists is also known as the “Wealth Definition of Economics”. The economists who fully supported and followed the economic ideas of Adam Smith are called classical economists.

Features/Characteristics/ Main Ideas of Adam Smith’ Definition

The main features or main characteristics or main ideas of Adam Smith’s definition of economics are as follows:

  1. Study of wealth: According to Adam Smith, economics is the study of wealth, which deals with production, consumption exchange and distribution of wealth.
  2. Secondary place to the study of man: Adem Smith and his followers have given primary importance to the study of wealth and secondary importance to the study of man. It means that the classical economists have regarded man as the rneans and wealth as the ends.
  3. Meaning of Wealth: This definition has included only materials goods like house, furniture, vehicles, gold, etc. in the definition of wealth. Non-material goods like services of teachers, lawyers, doctors, etc. have been excluded from the definition of wealth.
  4. Study of economic man: According to this definition, economics studies only economic man whose objective is only to earn more and more wealth.
  5. Investigation of causes of wealth of a nation: This definition shows that economics deals only with the inquiry into causes behind the creation of wealth. According to this definition, the source of wealth of a nation is the employed labour whose productivity can be increased through division of labour.

Criticism

The definition of economics given by Adam Smith was severely criticized by the writers like Carlyle and Ruskin. They criticized economics as the ‘Dismal Science’, ‘Bastard Science’, etc. The main criticisms of this definition are as follows:

  • Narrow meaning of wealth: The meaning of wealth given by Adam Smith is very narrow because he has included only material goods in the definition of wealth. He has excluded non-material goods in the definition of wealth.
  • Undue importance to wealth: Adam Smith has given primary importance to wealth and secondary importance to man. It emphasizes only accumulation of wealth but not the welfare of man.
  • Assumption of economic man: This definition has assumed the economic man whose motto is to acquire only more and more wealth. Moreover, this definition has also neglected other motivations of human beings such as fellow feelings, affection and love, etc.
  • Narrow scope of economics: Adam Smith has narrowed the scope of economics because he has confined the subject matter of economics only to the study of wealth.
  • Neglects economic welfare: Adam Smith has totally neglected the economic welfare of mankind. He has given importance only to obtain wealth.

2. Critically explain Marshall’s definition of economics. [10] [HSEB 2073, Set D]

Marshall’s Definition of Economics (Welfare/ New-Classical Definition)

Alfred Marshall, who is also known as the neo-classical economist, was greatly influenced by the criticisms against the wealth definition of economics or Adam Smith’s definition of economics. In his book ‘Principle of Economics’ published in 1890 AD, he gave more emphasis to human welfare than to wealth. In the words of Marshall, “Economics is a study of man in the ordinary business of life. In enquiries how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man”. From this definition, it is clear that economics is about the study of both wealth and human welfare but its main focus is the study of human welfare.

Features/Characteristics/ Main Ideas of Marshall’s Definition The features or characteristics or main ideas of Marshall’s definition of economics are as follows:

  • Study of human: According to Alfred Marshall, the subject matter of economics is mankind and his welfare but not wealth.
  • Study of human economic activities: Economics studies economics activities of man. Man performs social, religious and economic activities Economics studies only economic activities concerned with the material welfare of man.
  • Study of material-welfare: The main emphasis of this definition is on material welfare. The study of non-material welfare is outside the scope of economics.
  • Normative science: According to Marshall, economics is the normative science. As a normative science, economics studies what should be done to promote the material welfare of man.

Criticism

The definition of economics given by Alfred Marshall has been criticized by Prof. Lionel Robbins and other economists. These criticisms are as follows:

  • Narrow definition: According to Robbins, the definition of economics given by. Marshall is narrow. This definition has included only material welfare and has totally ignored non-materials welfare of mankind.
  • Relation between economics and welfare: in view of Marshall, the main objective of economics is to study welfare of mankind. But Robbins does not agree with the opinion of Marshall. Robbins remarks, “Whatever economics is concerned with, it is not concerned with material welfare as such.”
  • Welfare cannot be quantitatively measured: Marshall has explained quantitative measurements of welfare or utility. But welfare is a subjective concept and it cannot be measured in quantity as explained by Marshall.
  • Social science: According to Marshall, economics is a social science and as a social science it deals with persons living only in the society. It ignores others who also may have an economic problem.
  • Unclear definition: The distinction made in the definition of economics between ordinary business of life and extraordinary business of life is not clear.

3. Critically explain the Robbins’ definition of economics. [10] [NEB 2074, Set A and B]

Robbins’ Definition of Economics (Scarcity Definition) Lionel Robbins, a British economist, criticized Marshall’s definition of economics and gave his own definition in his book ‘An Essay on the Nature and Significance of Economic Science’ published in 1932 AD. In his own words, “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” This definition is regarded as the one of the most popular definitions of economics. It is also known as the scarcity definition of economics.

Features/Characteristics/ Main Ideas of Robbins’ Definition

The main features or ideas of Robbins’s definition are as follows:

  • Unlimited human wants: The Robbins’ definition of economics states that human wants are unlimited. If one wants is satisfied, another wants to crop up. Thus, different wants appear one after another.
  • Limited resources: All the resources which satisfy human wants are limited. This is known as the scarcity of resources. Any resource is considered as scarce if its supply is less than demand.
  • Alternative use of resources: All the so It means that scarce resources can be resources that have alternative uses. put to a number of uses. For example, a piece of land can be used for either cultivation, or for building a house or building a factory shed, etc.
  • Problem of choice: According to Robbins, economics deals with how a man makes use of scarce resources having alternative uses for the satisfaction of his unlimited wants. Since, this involves choice making economics is also called as a science of choice.

Criticism

Although Robbins’ definition of economics is regarded as the superior definition of economics, it is not free from criticism. The main criticisms against this definition are as follows:

  1. Hidden concept of welfare: Robbins has criticised Marshall’s definition for his welfare content but Robbins himself has included the concept of welfare through the back door. When we make a choice between ends and means, we take consideration of welfare.
  2. Even abundance may create economic problems: According to Robbins, economic problems arise only due to scarcity. But economic problems may also arise due to abundance. For example, the abundance of over production creates economic depression and abundance of human resources creates the problem of unemployment.
  3. Incomplete: This definition is incomplete because it has not covered the present day problems like unemployment, economic backwardness, poverty, inequality, inflation, etc
  4. .Self contradictory: Robbins’ definition is self-contradictory. He has contradicted himself by his two views about choice between ends. On the one hand, he said that economics is neutral as regards ends. On the other hand, he considered economics as the science of choice. These two things are just opposite to each other.
  5. Economics is not a positive science: Robbins’ definition of economics regarded economics only as the positive science. Economics is not only a positive science. It is also a normative science.

4. Compare Marshall’s definition of economics with that of Robbins. [10] [HSEB 2057]

Comparison between Marshall and Robbins’ Definition There are some similarities and dissimilarities between the definition of economics given by Marshall and Robbins, which are as follows:

 Similarities

The similarities between Marshall’s and Robbins’ definition of economics are as follows:

  1. Importance of man: Both definitions are based on the importance of man. Marshall emphasized that economics was a study of man. Robbins talked about man’s unlimited wants. Thus, in both the definitions, man was the centre of attention.
  2. Status of science given to economics: Both definitions have regarded economics as the science. Robbins emphasized the optimization process, which is scientific exercise. Similarly, Marshall also considered economics to be science.
  3. Rational man: Both definitions are based on the assumption of rational behaviour of man. Marshall assumed that the man aims at maximizing. his welfare, where as Robbins believed that rational man tries to maximize satisfaction.
  4. Concept of welfare: Both these definition emphasize on the material welfare of man. It was made clear that economics was concerned with particular aspects of people’s welfare. The psychological issue was kept preview of economics in both the definitions.

 Dissimilarities/ Differences

The major dissimilarities or difference between Marshall’s and Robbins’ definition of economics are as follows:

  1. Definition: Alfred Marshall defines economics as the social science that studies economic activities which promote material welfare of mankind. On the other hand, Robbins defines economics as the science which studies human behaviour as a relationship between ends and scarce means, which have alternative uses. The definition of Marshall is also known as the Welfare definition where as the definition of Robbins is also known as the scarcity definition.
  2. Human welfare and neutrality: According to Marshall, economics is the study of human welfare. Thus, Marshall regarded economics as the normative science as well as arts. On the other hand, Robbins regarded economics as the positive science, which has no any concern with human welfare. This, according to Robbins, economics is neutral regarding human welfare.
  3. Social and human science: According to Marshall, economics is a social science. It studies normal and social human beings. In Robbins’ view economics human science concerned with the economic activities of all men, whether ordinary or extra ordinary, since everyone faces the economic problem.
  4. Classificatory and analytical definition: Marshall’s definition is classificatory. It classifies, human welfare into material and non-material. On the other hand, Robbins definition is analytical because it focuses on the basic economic problems of scarcity.
  5. Practical and Theoretical view: Marshall’s definition is nearer reality and more useful for formulating economic policies. On the other hand, Robbins’ definition is of an abstract nature and therefore, it is away from reality.

5. Which definition of economics among Adam Smith, Marshall’s and Robbins’s is Superior? Explain with Causes. [10]

Superiority of Robbins’ Definition of Economics

The definition of economics given by Robbins is superior in comparison to definition of economics given by Adam Smith and Marshall. Robbins’ definition has also got wide acceptance in the world. This definition is regarded superior on the following ground:

  1. Positive science: Robbins tried to make economics more exact science. He has included central problem of economics i.e., scarcity in the definition of economics. Therefore, he wanted subject to be a positive science. Positive science has nothing to do with goodness and bad nature of the ends. He wanted to study all economics activities without bringing in welfare. He succeeded in this to some extent. Therefore, his definition is superior in comparison to other definitions.
  2. Analytical and scientific definition: Robbins’ definition has made the study of economics analytical and scientific. He provided reasons for the study of economic problem which is the problem of scarcity. Therefore, his definition is superior in comparison to other definitions of economics.
  3. Clear conception of human behaviour for economics: Robbins also gave a clearer view of what human behaviour economists are interested in. He told us that it is human behaviour for choice between ends and means.
  4. Clear on the scope of economics: The Robbins’ definition of economics has widened the scope of economics very well. According him, the scope of economics is problem of choice which arises, due to scarce resources and unlimited human wants.
  5. A universal definition: Robbins’ definition is applicable everywhere. According to him, economics is the study of unlimited human wants and limited resources, which his problem facing every country. Thus Robbins’ definition of economics is applicable to both poor and rich countries.
  6. Points out central problem of economics: Both Adam Smith’s and Marshall’s definition are defective due to failure of the definition in identifying the central problem. Robbins removed this defect.

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