Introduction and some key concept of Economics.

  • The word Economics comes from the Greek word oikonomia which is a composite word of oikos that means house and nomos that means management.So oikonomia (Economics) means household management.
Composition of the word Economics

Adam Smith wrote the book “The Wealth of Nations” which was published in 1776. With that book he gave birth to the notion of  free markets that worked to improve general welfare. This thinking was totally new, and gave birth to economics.

The father of modern economics, Samuelson became the first American to win the Nobel Prize in Economics (1970) for his work to transform the fundamental nature of the discipline. He insisted that mathematics was essential, and his numerous and groundbreaking contributions provided the foundation on which modern economics is built. Samuelson’s textbook, Economics: An Introductory Analysis, is one of the most widely used in the  world.

We, general people as well as the typical first year students go with a very little idea idea of what economics is? They  might have heard  something like economics is the study of MONEY or economics is another word for accounting or economics is a HARD subject. U -U-U-U-F Don’t take that subject !     



 But none of those IDEAS are true. Rather than we can simply learn as,

That’s the classic definition of economics. Now a days we can define ECONOMICS as—-

Sandwich, car ,house or whatever things people like to consume are called goods.

Garbage(Domestic waste) as well as another things that people basically don’t like are bads.

Labor, tools,  equipments , iron and any other things that are used to produce another things are called resources.

W e can define ECONOMICS more simply as—-

He desires he will have a luxuries house ,a car, a laptop and so on .But his money (resources) is limited.

Basically there are people and people need resources to fulfil their desires. These resources cannot be infinite. But the desires can be. So people need to make choices about how to use their scarce resources. Economics study these choices.

 We must make choices I can spend a dollar on an apple but that means I can’t use that dollar to buy an orange. This holds true for everything. Every choice we make involves doing one thing instead of another the value of the best thing we give up is called opportunity cost.

 If I choose to spend one dollar to buy an  Apple and the next best thing I could have chosen was a one dollar orange then the orange was the opportunity cost of that Apple. Economists focus on opportunity costs as the true cost of making a choice. The opportunity cost is not necessarily the same as the monetary cost. Notice that I did not say that the opportunity cost of the Apple was one dollar. 

For example, if the KFC food become cheap people eat more of them; if new information becomes available showing that KFC food  will kill  people they will eat fewer of them. These changes are incentives which change human behaviour. 

Economists talk a lot about rational people making decisions at the margin. What they really mean is that people decide whether to do a little bit more of something or a little bit less of something. For example if I  run a business growing and selling potatoes, I might consider the margin level. It’s a good idea  to compare the marginal benefit with  the marginal cost.

If the marginal benefit is greater than marginal cost then a rational people will produce or sell mango and he or she will earn profit.

If the marginal benefit is less than the marginal cost, then a rational people will not produce or sell mango and he or she will not earn profit from it.

These are the basics of economics. Learn economics with cool head to informed warm heart. we  can’t promise you that learning economics will make you wealthy, but we can promise that learning economics will enlighten your mind and make you a more informed decision maker, And that makes us all better off. 

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