As on the definitions there is no similarity on the nature of economics.
Some of the economist has given their opinions economics as an art and some of them have defined it as a science and other have defined it as a science and art both which is explained below:
Science is a systematized body of knowledge that establishes the cause and effect relationship between variables.
Economics is a branch of knowledge where the various facts are systematically collected, classified and analyzed.
Economics investigates the possibility of deducing generalizations as regards the economic motives of human beings. Thus, economics is a science.
An art teaches us to for solving problems.
Economics offers us practical guidance in the solution of economic problems.
Better implementation of economic plan and policies requires skill, efficiency, knowledge or ability.
So, the economics is and art.
An art is a system of rules for the attainment of a given end.
A science teaches us to know; an art teaches us to do.
Applying this definition, we find that economics offers us practical guidance in the solution of economic problems.
Science and art are complementary to each other and economics is both a science and an art.
Keep in Mind
Scope of Economics.
Scope means field of study.
Nature of economics, relationship with other subjects, limitations of economics, its importance and subject matter of economics falls under the scope of economics.
Economics can be studied through traditional approach and modern approach.
Human wants are unlimited.
To fulfill our wants, we do some deliberate efforts.
According to this approach, the subject matter of economics can be viewed as a continuous circle of unlimited wants, efforts and satisfaction.
In economics, this circle involves five major divisions namely consumption, production, exchange, distribution and public finance.
The satisfaction of human wants through the use of goods and services is called consumption.
Utility analysis, consumer behavior, demand theory etc are studied under it.
Production is the creation of utility or producing (or creating) things for satisfying human wants. Theories of production and factors production are studied on it.
Goods are produced not only for self-consumption, but also for sales.
They are sold to buyers in markets.
The process of buying and selling constitutes exchange.
Price and output determination process on different market structures, revenue and cost curves long term and short term equilibriums of firms and industries are studied on it.
The production of any commodity requires four factors.
They are land, labour, capital and organization.
These four factors of production are to be rewarded for their services rendered in the process of production.
The land owner gets rent, the laborer earns wage, the capitalist is given with interest and the entrepreneur is rewarded with profit.
The process of determining rent, wage, interest and profit is called distribution.
It studies how the government collects revenue and how it spends it.
Thus, in public finance, we study about public revenue and public expenditure.
Public expenditure, public revenue, fiscal policy, financial administration, public borrowing and its management are the subject matters of public finance.
In this approach study of economics is divided into Microeconomics and Macroeconomics.
The word ‘micro’ was derived from the Latin word ‘Mikros’ which means small.
The study of small or individual economic activities is the microeconomics.
It is also known as price theory because we study about price determination process of individual firms, individual industries and pricing of factor of production under microeconomics.
Assumptions are made in microeconomics theories, other things remaining same are assumed in each of the microeconomics theories.
The word ‘Macro’ was derived from the Latin word ‘Makros’ which means large or whole.
Macroeconomics is the study of aggregate economic variables as a whole.
It studies about national income, price level, employment level, money, economic growth rate etc.
National income, aggregate consumption, aggregate savings, aggregate investment etc. are related to the whole economy.
The limitations of economics clarify the scope of economics.
The limitation of economics is shown below:
Study of activities related to wealth only
Economics deals with the activities related to the wealth only.
Non-economic activities do not fall under the scope of economics in the view of classical economists.
Study of social man
Economics studies the activities of social man only that means the activities of the persons like Robinson Crusoe is not studied in economics in view of Marshall.
Study of normal man
Economics studies the behavior of rational man only.
The activities of irrational and abnormal man like drunkards, gamblers, drug addiction etc. do not fall under the scope of economics.
Study of scarce commodities
Economics studies only the scarce goods.
According to Robbins only those goods or services which are insufficient to us is studied in economics that is free goods which are sufficient are not studied in economics.
Study of real man
In economics we study about the activities of real man only.
The activities of fictitious and imaginary persons like god, witch, ghost etc are not studied in economics.
Other things being equal
Economic theories are based on the assumptions of other things remaining same in microeconomics.
Economic theories are not applicable when other things do not remain constant.
Economic laws are scientific laws.
But they are not exact as pure science because man is affected by nature, environment, habit customs etc.
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