Scope of Economics

The scope of economics encompasses the areas it covers in its study. The field of study in economics is broad and extensive. It studies human needs, wants, and efforts related to wealth acquisition.

It not only analyzes and explains economic phenomena but also formulates solutions. Understanding the subject matter, nature, and limitations of economics is essential within its scope.

Subject Matter of Economics

From the definitions of economics given by various economists, we can easily estimate what its subject matter might be. According to Adam Smith, economics studies human activities related to wealth. Therefore, according to Smith, the subject matter of economics is wealth. 

Marshall, considering it a social science, considered the study of human material welfare as the subject matter of economics. Robbins considered it a purely human science. 

Therefore, according to him, its subject matter is the study of the alternative uses of limited resources by which people fulfill unlimited needs.

Human needs are unlimited, and people are always striving to fulfill those needs. In the process of fulfilling needs, satisfaction is obtained, but in the same process, another need is created or born. This process continues as long as a person lives. 

Therefore, the subject matter of economics has these aspects as its central focus.

The subject matter of economics can be divided into two parts: traditional and modern concepts.

(a) Traditional Concept:

According to the traditional concept, the economic elements involved in economic activities, namely production, consumption, exchange, distribution, and public finance, are the subject matter of economics. These are explained as follows:

1. Consumption: Under consumption, we study the rules and principles related to consumer behavior. This includes how a consumer can obtain maximum utility from the consumption of goods, the demand for goods and its elasticity, consumer surplus, etc.
2. Production: Under production, we study the meaning, characteristics, types of factors of production (land, capital, labor, organization), and their contribution to production. This includes the laws of variable proportions, the law of returns to scale, etc.
3. Exchange: Under exchange, we study the process of buying and selling goods. This includes market structure, price determination processes, etc.
4. Distribution: Under distribution, we study the meaning and determination process of the payments made to the factors of production (land, capital, labor, and organization), which are respectively rent, wages, interest, and profit.
5. Public Finance: Under public finance, we study the government's expenditure on various activities and the sources from which it obtains income or revenue.

(b) Modern Concept: 

According to the modern concept, the entire subject matter of economics is divided into two parts for analysis: microeconomics and macroeconomics. 

Microeconomics studies and analyzes the economic activities of separate individual units of the economy, while macroeconomics studies the aggregate of overall economic variables.

Nature of Economics

Under the nature of economics, we study whether economics is a science or an art. Economists do not have a consensus on whether economics is a science or an art. Some economists consider economics as a science, while others consider it as an art. This is analyzed below:

(a) Economics as a Science: 

To conclude whether economics is a science or not, it is necessary to first clarify the meaning of science. Science is the systematic knowledge of any subject. It explains the mutual relationship between cause and effect. Also, the laws of science are universally accepted and based on testing.

Under economics, economic facts are collected systematically, and their analysis and classification are also done. It systematically studies the production, consumption, exchange, and distribution of wealth. Its laws also express the relationship between cause and effect. 

For example, in economics, the law of demand argues that changes in price cause changes in demand. Here, the change in price is the cause, and the change in demand is the effect.

Various economic concepts, such as the law of diminishing marginal utility, inflation, business cycle, etc., are universally accepted concepts. 

Similarly, the laws of economics are used to solve various economic problems under capitalist, socialist, and mixed economies. 

These laws have been tested. Here, the laboratory is not a specific room but the entire economy. Therefore, economics is a science.

(b) Economics as an Art: 

Art is the branch of knowledge that teaches how to put theories into practice. In other words, it teaches how practical problems are solved. 

Economics helps in solving problems such as poverty, unemployment, low living standards, inflation, etc., in a country. 

It also teaches how economic development can be achieved in economically backward countries. Therefore, economics is an art.

Conclusion:

In conclusion, economics is both a science and an art. It studies various economic problems and provides solutions to such problems.

Limitations of Economics

To clearly understand the scope of economics, it is necessary to study its limitations. The limitations of economics refer to things that economics cannot study. The limitations of economics are as follows:

(a) Study of Activities Related Only to Wealth: Humans have to perform religious, cultural, social, political, and economic activities. But the relationship of economics is only with economic activities related to wealth. Other non-economic activities do not fall within the scope of economics.

(b) Study of Social Humans: According to Marshall's definition, economics studies only humans living in society. It does not study humans who are far from society. However, according to Robbins' definition, economics studies all humans, whether they live in society or far from it, who have to face the problem of scarcity. Therefore, it is a human science. But most economists are in favor of Marshall's definition.

(c) Study of Normal Humans: Economics studies the natural behavior of normal humans. It does not study the abnormal behavior of drunkards, misers, and madmen.

(d) Study of Scarce Goods: Economics studies only scarce goods. The supply of such goods is limited. Economics does not study free goods. Therefore, such goods do not fall within the scope of economics.

(e) Other Things Remaining Constant: Each economic law is accompanied by the phrase Ceteris Paribus meaning "other things remaining constant". This is because economics is the study of human activities, and human activities are influenced by various factors. Therefore, all economic laws may not be universally accepted and always applicable. Hence, economic laws carry the phrase "other things remaining constant."