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What is the Subject Matter of Economics?

Subject Matter of Economics:

Different economists have different opinions regarding subject matter of economics. According to Adam Smith and his followers the subject matter of economics is wealth, i.e., consumption, production, distribution and exchange of wealth.

According to Marshall and his followers the subject matter of economics is the material welfare i.e., the “Attainment and the use of material requisites of well-being, they advocate that economics is a study of wealth but the most important is the study of man.

According to Robbins, the subject matter of economics is the economic problem i.e., the problems arising due to multiplicity of wants and scarcity of means which have alternative uses.

According to Lord Keynes, the subject matter of economics is the “The determination of National income, Employment and Rate of interest”.

We may conclude that the approach of economists prior to Keynes was micro and the approach of Keynes and his followers is macro.

All this discussion comes to the point that basically economics is science of wealth because wealth is the only means by which material welfare of people can be maximized, maximum possible desires can be satisfied a desired level of income and employment can be achieved.

Since Robbins definition of economics is the most accepted definition of the subject in the world these days the subject matter of economics will be discussed with reference to his definition. Thus, in economics the behavior of the human being is studied which he adopted as a relationship between scarcity of means and multiplicity of ends. Means like time, money, wealth and natural resources are limited while human desires are unlimited. Therefore, a question arises that how the resources are allocated to satisfy maximum of wants?

We already know that human wants are unlimited. These wants force us to do some Economics activities in the form of land, labor, capital and entrepreneurship, as a result of these activities, goods and services are produced on one hand and rewards in the form of rent, interest, wages and profits are distributed among the factors of production on the other hand.

These reward or incomes are resources of the people. They convert these (limited) monetary into real resources by buying goods and services certainly in an alternative fashion. These goods and services are exhausted to satisfy wants. This cycle goes on and on. This truly represents the economic life of the people. Hence, it is the core of economics or, in other words, the subject matter of economics.

Simply, economics is related with the decision what should be produced, how should be produced, for whom should be produced and when should be produced. Further, how the scarce resources should be used to increase the level of economic development target.

Thus, in the subject matter of an economy following points are discussed:

Optimum Utilization of Resources:

The economy should use natural, human and artificial resources in such a way that there should not be any misuse or waste of these resources. That is, the economy must endeavor to achieve full employment not only of labour but of all its resources.

What Commodities to be Produced?

Any economy decides to the quantity and the type of goods to be produced. Since means are scarce, the economy chooses between different alternative collections of goods and services that may be produced. Basic needs are produced on preference basis for this purpose price theory is taken into study.

In what Quantity to be Produced?

After deciding the production of goods, quantity to be produced is decided. For this purpose, degree of demand is kept in view to avoid from over production.

How to Produce?

After deciding the goods to be produced and their quantity, the economists or experts determine the techniques of production to be used, e.g., labor-intensive or capital-intensive. For this purpose, we study production of wealth.

Where and When to be Produced?

The next decision about goods to be produced is to decide proper place and time for production. For this purpose, the experts take in to account means of transport and communications, availability of raw material and laborers, and market conditions, etc. Similarly, they also keep in view the weather, customs, traditions and fashion, etc.

How to Distribute the Produce?

As the production of goods is the result of joint efforts of factors of production like land, labour, capital and organization, therefore, it must be distributed among them according to their contribution. For this purpose, theories of distribution of wealth help the experts.

After keeping all above problems in view, it becomes necessary to keep expanding or developing the production., consumption, exchange and distribution. Standard of living of the people, economic growth and development must be kept to continue to the higher possible level.

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