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Scope of Economics

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Scope means an area of study or coverage of the particular subject. Scope of economics means area covered by subject economics i.e. the whole topics which should be studied in economics. The scope contains two headings. They are subject matters and nature of economics.

Subject matter of economics

The area covered by economics is the subject matter of economics. The subject matter of economics is studied with the help of following three points:

i. On the basis of definition

ii. Traditional approach

iii. Modern approach

On the basis of definition

Different economists have a different view regarding the subject matter of economics. The classical economists, Adam Smith considered economics as a science that deals with wealth. Therefore, the subject matter of economics is the study of nature and causes of the wealth of nation. The leader of Neo-classical economists, Alfred Marshall considered economics as the science of welfare. Therefore, the subject matter of economics in the study of mankind in the ordinary business of life. The economists, L.Robbins considered economics as a modern or scarcity and choice definition. Therefore, the subject matter of economics is the study of human behavior as a relationship between ends and scarce means.

Traditional Approach


According to the traditional approach, economics deals with the activities of man. It deals with those activities of man through which he tries to satisfy his wants. There are three fundamental economic wants such as food, cloth, and shelter. As we know, the human wants are unlimited but the means to satisfy them are limited. When the first want is satisfied, second wants arises and to fulfill the second urgent want, effort should be done to get resources or means. Therefore, according to the traditional approach, the continuous circle of unlimited wants, efforts and satisfaction are known as a subject matter of economics.

According to traditional approach, subject matter of economics includes following things:

  • Consumption: Consumption means the process of destroying the utility. In consumption, we try to analyze the demand of the consumer regarding goods and service to derive the maximum satisfaction. Thus, the laws and theory related to demand and consumer's behavior are studied in consumption.

  • Production: It is the creation of utility. The theory based on short-run and long-run production functions are studied under it. In production, we try to analyze the behavior of the producer and how does a producer allocate his resources so as to get maximum profit out of his production.

  • Exchange: In exchange, we study the buying and selling process of goods and how the price of goods and service are determined by various markets like perfect competition, monopoly, monopolistic, oligopoly and duopoly.

  • Distribution: In distribution, we study the distribution of national income among the factors of production like land, labor, capital and organization. It involves the sharing of what is produced. It includes law and theory of wage, rent, interest and profit.

  • Public finance: Public finance is related to the government income and expenditure. In public finance, we study the different sources of income of the government and how does the government spend its income. It includes a theory of taxation, government revenues, and expenditure.

Modern views


According to modern view, the subject matter of economics is divided into two parts:

  1. Microeconomics:
    Micro economics studies the economics activities and behavior of small individual units of the economy. It means microeconomics can be defined as the study and analysis of the behavior of individual economic units. For example, Microeconomic studies about the behavior of an individual consumer, one producer, a firm, a household, one industry and so on.

    According to K.E. Boulding, "Micro economics is the study of a particular firm, household, individual price, wages, income, individual industry and particular commodity".

  2. Macroeconomics:
    Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. It is concerned with nature, relationship and behavior of such aggregate quantities and averages as national income, total consumption, savings, investment, total employment, general price level aggregate expenditure and aggregate supply of goods and services.

    According to K.E. Boulding, "Macroeconomics is the study of the nature, relationship, and behavior of aggregate and averages of economic quantities."


Adhikari, Ramesh Prasad, Economics-XI, Asmita Pustak Prakashan, Kathmandu

Kanel, Navaraj, Principles of Economics-XI, Buddha Prakashan, Kathmandu

Kharel, Khom Raj, Economics In English Medium-XI, Sukunda Pustak Bhawan, Kathmandu

  1. Scope of economics means area covered by subject economics i.e. the whole topics which should be studied in economics.
  2. The subject matter of economics we studied with the help of three points and they are on the basis of definition, traditional approach, and modern approach.
  3. According to modern approach, the subject matter of economics is broadly classified under two headings micro economics and macro economics.
  4. Economics is also a systematic body of knowledge because it studies about production, consumption, distribution, exchange and public finance very systematically. 

Very Short Questions

  • ? An Enquiry into the Nature and Causes of Wealth of Nations is the book of economist

    None of above
    ?Adam Smith
  •  Economics is the Science of Wealth who gave this definition ?

    J. K. Mehta
    ?Adam Smith
  •  Economics is what economists do. It has been supported by

    All the answers are correct
    Gunnar Myrdal
    ?Richard Jones
  • ? Human Welfare is the subject of Economics. This statement is associated with the name of which of the economists ?

    All the answers are correct
  • Who has given scarcity definition of economics ?

  • ? Economics is a science the basis of this statement is

    Relation between cause and effect
    Use of deductive method and inductive method for the formations of laws
    All the answers are correct
  • Which theory is generally included under micro economics ?

    Income Theory
    Employment Theory
    None of the answers are correct
    Price Theory
  • According to Marshall, the basis of consumer surplus is

    Law of proportions
    Law of diminishing marginal utility
    ?Law of equi-marginal utility
    All the answers are correct
  • Which of the following is an economic activity ?

    To teach son at home
    Teaching of a teacher in the school
    To serve her child by mother
    To play football by a student
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What is micro economic?

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