Economics is the social science that is concerned with the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic models developed out of the broader field of political economy in the late 19th century, owing to a desire to use an empirical approach more akin to the physical sciences.
Economics was formerly called political economy. The term Political economy means the management of the wealth of the state. “Adam Smith, the father of modem Economics, in his book entitled 'An Enquiry into the Nature and Causes of the Wealth of Nations’ (Published in 1776) defined Economics as a study of wealth. Smith considered the acquisition of wealth as the main objective of human activity. According to him the subject matter of Economics is the study of how wealth is produced and consumed. Smith's definition is known as wealth definition.
This definition was too materialistic. It gave more importance to wealth than to man for whose use wealth is produced. The emphasis on wealth was severely criticized by many others. Cailyle, Ruskin and other philosophers called it the Gospel of Mammon.
They even called it a dismal science as it was supposed to teach selfishness. Later economists held that apart from man the said study of wealth has no meaning. Economics is concerned not only with the production and use of wealth but also with man. It deals with wealth as serving the purpose of man. Wealth is only a means to the end of human welfare.
We cannot consider the desire to acquire wealth as the inspiring factor behind every human endeavor. Nor can it be expected to be the sole cause of human happiness. The emphasis has now shifted from wealth to man. Man occupies the primary place and wealth only a secondary place.
Economics is a popular, useful and significant social study. It studies economic activities of a man. Economic activities are those activities which are concerned with the efficient use of such scarce means as can satisfy the wants of the man. Human wants are unlimited, in the sense, that as soon as one want is satisfied another crops up. Most of the means (resources) for satisfying these wants are limited, because their supply (availability) is less than demand (requirement).
Because of scarcity of means and their diverse uses, there emerges a problem of choice. Everybody has to make a choice with regard to the use of his scarce means so that he may get maximum satisfaction from them. In short, Economics is the study of those activities of human beings which are concerned with the satisfaction of unlimited wants by utilizing limited resources. Economics is not concerned with lifeless matter as is the case with natural sciences like Physics and Chemistry. Several definitions of Economics have been given.
For the sake of convenience let us classify the various definitions into four groups:
1. Science of wealth
2. Science of material well-being
3. Science of choice making and
4. Science of dynamic growth and development