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BASIC CONCEPTS IN ECONOMICS
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Providing the basic knowledge of economics. To know the basic terms of economics and found easily to understand the economics
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BASIC CONCEPTS IN ECONOMICSINTRODUCTION
What is a science?
Science is a systematic body of knowledge that can be categorized into two
main types:
1.Natural sciences (Exact science)
. University acceptable laws
. Validity can be tested in laboratory
. Empirical approach
. Examples: Mathematics,physics,chemistry
2.Social Sciences (Abstract/behavioral sciences)
. Study of human behavior
. Cannot be empirically tested or studied in a laboratory
. Laws are not universal, but rather statements of general human tendencies
. Examples: Psychology(mental aspect),Sociology(social aspect)
This distinction highlights the differences in methodology and application
between natural and social sciences.
WHAT IS ECONOMICS:
Economics is a social science that:
1.Orginates from the greek word “Oikonomia”(household management)
2.Is reffered to as the “Queen of social sciences” by paul samuelson
3.Studies the economic aspect of human behavior
4.Examines how human statisfy unlimited wants with limited resources
KEY FOCUS: Allocation of scarce resources to meet unlimited human
desires.
Kautilya's Views on Economics (Arthashastra)
Definition: Arthashastra = "Science of Wealth" (Artha: Wealth, Shastra:
Science)
Key Points:
1. Role of the State: Government plays a crucial role in economic
development.
2. Wealth Creation: Focus on creating wealth to ensure state welfare.
, 3. Good Governance: Efficient administrative machinery essential for
prosperity.
4. Comprehensive Framework: Compilation of political ideas into
Arthashastra.
Main Objectives:
- Economic development
- State welfare
- Good governance
- Efficient administration
Key Concepts:
- State intervention in economy
- Wealth creation and distribution
- Administrative efficiency
- Political stability
Influence: Kautilya's Arthashastra (4th century BCE) remains a foundational
text in Indian political economy, influencing economic thought and policy-
making.
Relevance Today: Kautilya's ideas remain relevant in modern economic
discourse, highlighting the importance of:
- Effective governance
- Strategic economic planning
- State-market balance
- Social welfare considerations
*Definitions of Economics: Adam Smith's Wealth-Oriented Definition*
Adam Smith (1723-1790), considered the "Father of Economics," defined
economics as:
*"The study of wealth."*
*Key Points:*
1. Focus on wealth creation and distribution
2. Emphasis on economic growth and development
3. Assumes unlimited wants and scarce resources
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