PRODUCTION
Is a creation of goods and services for personal consumption or use.
OR
Economists define production as a process of creating goods and services for exchange i.e for sale in order to satisfy people‘s needs.
OR
Is a creation of utility. Utility means the level of satisfaction a consumer derives from consuming a certain unit of goods and services.
Economics Activities:
Prof. Marshall defined all activities concerning with the earning and spending income (wealth) such as-; the activities of farmers, labor, shopkeeper, teachers, doctors and advocates. Thus all activities which are done with view to earn income are called Economic activities.
NON ECONOMIC ACTIVITIES:
Refers to all activities which do not have the earning of wealth as their nature. E.g. .playing football for health reasons, singing by mothers, teachings by a teacher to his own children, etc.
SCARCITY
Means limited in supply or less than that what is required or needed.
CAUSES OF SCARCITY.
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Limited stock of resources.
Resources are limited in number therefore it is not possible to produce enough goods and services to satisfy all wants.
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Unlimited wants.
Wants are unlimited in number therefore resources available cannot produce enough goods and services to satisfy all wants.
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Alternative uses of the available resources.
E.g, same land can be used to grow beans, rice or other uses such as land for construction of buildings.
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Resources are normally scarce and therefore you have to choose from the few alternatives to satisfy the needs.
Producers – chooses what goods to produce.
Consumers – Decides which wants/needs they require.
SCALE OF PREFERENCE:
Is a list of all wants in an order to their importance such that that the most important wants are kept first on the list followed by the less important wants.
OPPORTUNITY COST.
- The true cost of producing an additional of goods or services in their value of goods or services that must be given up to obtain. E.g. A student may have two alternatives of her/his evening time to do homework and the alternative is to play football.
- If he/she chooses to play football, the opportunity cost of playing football is the homework.
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EXCHANGE
Refers to the process of selling or buying of goods and services to government to guarantee wealth (income).
MORE IMPORTANCE TO WEALTH DEFINITION
The definition gave too much importance of wealth and ignored human welfare and moral values. Because of these weaknesses, Adam smith’s definition of economics could not be accepted.
2. WELFARE DEFINITION:
According to Marshall in his book titled “principle of Economics”. Defined economics is the study of man in ordinary business of life. It examines that part of individual and social actions which is closely connected with the attainment and the use of material requisites for well being.
The main features of Marshall’s definitions are:
- Economics is a social science and it studies the economic activities of social normal and real man.
- Wealth is a means while the ends are human welfare i.e. wealth is for man and man not for wealth.
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The central point in the study of Economics is man’s material welfare.
CRITICISM
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Strongest attack on Marshall’s Definition comes from Prof. Robbins. The main criticisms of Marshall’s definition are;
- Wrong concept of material goods. Economics is not all about the study of material goods. In reality it is not easy to distinguish material things and immaterial things. Economics also studies immaterial goods such as the services of teachers, doctor, advocates, singer etc.
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Economics has no relationship with the material welfare according to Prof. Robbins. Economics can’t be linked with material welfare it is because;
i. The concept of welfare cannot be defined exactly.
ii. In economics we study a number of such activities which cannot be regarded goods from welfare point of view E.g. war, production of home etc.
iii. Economics do not have appropriate scale of measurement by which welfare can be measured.
3. Not a social science.
According to Robbins, Economic is not a social science rather it is a human science.
4. Wrong division of human activities in Economics.
Marshall Division of human activities was also wrong. According to Robbins every activity has main aspects and one of them is economic aspect.
5. Classification – Marshall Definition is classified. There are many categories but the destination between there is not clear Eg ordinary business, social and unsocial, material and immaterial, economic and non-Economic etc.
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Marshall’s definition was better than Adam smith’s definition yet was rejected after sometimes because of these weaknesses.
Welfare Definition
Lionel Robbins published a book “An Essay on the Nature and Significance
of Economic Science” in 1932. According to him, “economics is a science which
studies human behaviour as a relationship between ends and scarce means which
have alternative uses”. The major features of Robbins’ definition are as follows:
a) Ends refer to human wants. Human beings have unlimited number of
wants.
b) Resources or means, on the other hand, are limited or scarce in supply.
There is scarcity of a commodity, if its demand is greater than its supply. In
other words, the scarcity of a commodity is to be considered only in relation to
its demand.
c) The scarce means are capable of having alternative uses. Hence, anyone
will choose the resource that will satisfy his particular want. Thus, economics,
according to Robbins, is a science of choice.
Criticism: a) Robbins does not make any distinction between goods conducive
to human welfare and goods that are not conducive to human welfare. In the
production of rice and alcoholic drink, scarce resources are used. But the
production of rice promotes human welfare while production of alcoholic drinks
is not conducive to human welfare. However, Robbins concludes that economics
is neutral between ends.
b) In economics, we not only study the micro economic aspects like how
resources are allocated and how price is determined, but we also study the macro
economic aspect like how national income is generated. But, Robbins has
reduced economics merely to theory of resource allocation.
c) Robbins definition does not cover the theory of economic growth and
development.
SCARCITY DEFINITION.
According to Lionel Robbins and his followers like Stigley, Samuelson, Carnations and many other. Modern Economists defined economics as;
- A science which studies human behavior as a relationship between ends and scarce means which have alternative uses.
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FACTS OF ROBBIN’S DEFINITION.
According to Robbin’s and his follower Samuelson.
- Human wants are unlimited.
- Human wants have alternatives.
- Resources are scarce.
- Resources have different importance.
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The unlimited wants and the scarcity of the resources give rise to the problem of choice.
Choice refers to the process of making selections among multiple or several alternatives.
CRITICISM OF ROBBIN’S DEFINITION
- The difference between means and ends is not clear. This definition uses two terms, means and ends which have not been clearly distinguished.
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Neutral towards ends.
The definition regards economics is neutral towards ends if it is occupied then used. The study or economics would be of no use of which it would not remain a fruitfully science. Thus economist is a tool maker as well as toll users.
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Reduced merely to valuation theory.
Robbins definition has reduced Economics merely to evaluation theory. This does not taken into account. The problem of macro economics and growth.
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Problem of abundance.
All economic problems do not arise from scarcity. Some of them may also arise from abundance, such as the problem of over production etc.
Hence in simple words we can say Economics is a science that studies human behavior as a relationship between ends and scarce means which have alternative uses.
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i) Wealth Definition
Adam smith (1723 -1790), in his book “An Inquiry into Nature and Causes
of Wealth of Nations” (1776) defined economics as the science of wealth. He
explained how a nation’s wealth is created. He considered that the individual in
the society wants to promote only his own gain and in this, he is led by an
“invisible hand” to promote the interests of the society though he has no real
intention to promote the society’s interests.
Criticism:Smith defined economics only in terms of wealth and not in terms of
human welfare. Ruskin and Carlyle condemned economics as a ‘dismal science’,
as it taught selfishness which was against ethics. However, now, wealth is
considered only to be a mean to end, the end being the human welfare. Hence,
wealth definition was rejected and the emphasis was shifted from ‘wealth’ to
‘welfare’.
ii) Growth Definition
Prof. Paul Samuelson defined economics as “the study of how men and
society choose, with or without the use of money, to employ scarce productive
resources which could have alternative uses, to produce various commodities
over time, and distribute them for consumption, now and in the future among
various people and groups of society”.
The major implications of this definition are as follows:
a) Samuelson has made his definition dynamic by including the element of
time in it. Therefore, it covers the theory of economic growth.
b) Samuelson stressed the problem of scarcity of means in relation to
unlimited ends. Not only the means are scarce, but they could also be put to
alternative uses.
c) The definition covers various aspects like production, nglish-swahili/distribution” target=”_blank”>distribution and
consumption.
Of all the definitions discussed above, the ‘growth’ definition stated by
Samuelson appears to be the most satisfactory. However, in modern economics,
the subject matter of economics is divided into main parts, viz., i) Micro
Economics and ii) Macro Economics.
Economics is, therefore, rightly considered as the study of allocation of
scarce resources (in relation to unlimited ends) and of determinants of income,
output, employment and economic growth.
GENERAL MEANING OF ECONOMICS.
Is a social science which studies how societies allocate scarce resources in production of goods and services to satisfy their needs.
IMPORTANCE OF STUDYING ECONOMICS.
- It helps to build up a body of principle and furnish the economist with lots of economic analyzing that will enable students to understand current economic problem and to see the economics consequence of perusing a particular time of policy.
- It helps in nglish-swahili/interpreting” target=”_blank”>interpreting economic issues rising from government and non-government policies.
- It helps in managing personal life and that of the society.
- It helps to distinguish various economic systems such as capitalist, socialist and mixed economy.
- It explains economic theories and shows how they apply to a particular economy. Economic theories are simplified representation of the real word that we use to understand, explain and predict economic phenomena in the real world. They can be inform of statements or graphs.
- Helps in discussion and analysis of international economic issues and dealing.
- It helps students to use the terminologies, language and symbolism of the subject clearly and communicate economic ideals.