Maharashtra Board Class 11 Economics Chapter 1 Basic Concepts In Economics PDF Download

Chapter 1: Basic Concepts In Economics

Introduction

Today's world is marked by scientific inventions and discoveries. This remarkable scientific progress helps us ask the question: What is a science? Science is the systematic body of knowledge. There are two main types of sciences.

Natural sciences and Social sciences are the two main types of sciences.

Natural science is one whose laws are universally acceptable. Their validity can be tested in a laboratory under controlled conditions. Natural sciences are also called exact sciences because of their empirical approach to study. Examples are Mathematics, Physics, Chemistry.

Social Science is called abstract or behavioural science. It is related to the study of some aspect of human behaviour. Psychology is related to the 'mental' aspect of human behaviour. Sociology is related to the study of the 'social' aspect of man as a member of society. Human behaviour can neither be empirically tested nor can be studied in the laboratory. Hence, the laws of social sciences are not universal. They are only statements of general human tendencies.

Meaning of Economics

Economics is a social science. The origin of the term 'Economics' lies in the Greek word 'Oikonomia' which means management of the household.

Economics is referred to as 'Queen of Social Sciences' by Paul Samuelson. Economics deals with the economic aspect of human behaviour. It deals with how human beings satisfy unlimited wants with limited means.

Let us understand the nature of Economics with respect to some popular definitions.

Kautilya's Views on Economics

Artha means 'Wealth' and Shastra means 'Science'. Arthashastra implies the science of acquiring and managing wealth. Essentially, Arthashastra is a treatise on Political Economy in its broadest sense.

Key-points Based On Kautilya's Views

1. Crucial role of the state or government.

2. Focus on creation of wealth as the means to ensure welfare of the state.

3. Need for efficient administrative machinery for good governance.

4. Compilation of political ideas into Arthashastra.

Do You Know?

Kautilya was a great statesman, philosopher, economist and royal advisor during the Maurya period. He is also known by the name Chanakya or Vishnugupta. Kautilya authored the ancient Indian political treatise, the 'Arthashastra'.

Definitions of Economics

1. Adam Smith's Wealth-Oriented Definition of Economics

Classical economist Adam Smith is regarded as the "Father of Economics". He has given the wealth-oriented definition of Economics. Out of his many literary contributions to Economics, he is most famous for his 1776 piece of work, "An Inquiry into the Nature and Causes of Wealth of Nations". Adam Smith defines Economics as "a science of wealth".

Key-points Of Adam Smith's Definition

1. Laissez faire, that is, non-intervention of the government.

2. Capital and wealth accumulation.

3. Nature's law in economic affairs.

4. Division of labour as an aspect of growth theory.

Teacher's Note

Adam Smith is called the Father of Economics because he explained that people work for their own profit, just like a shopkeeper wants to make profit from his shop. This helps the whole economy grow.

Exam Trick

Remember: Adam Smith = Wealth. He said Economics is about creating and managing wealth. The term is "Wealth of Nations".

Points to Remember

Adam Smith defined Economics as the science of wealth.
He wrote "An Inquiry into the Nature and Causes of Wealth of Nations" in 1776.
He believed the government should not interfere in business.
Division of labour helps increase wealth and production.

2. Prof. Alfred Marshall's Welfare-Oriented Definition of Economics

Neo-classical economist Prof. Alfred Marshall has given the welfare-oriented definition of Economics. His famous book is "Principles of Economics" which was published in 1890. His definition states:

"Economics is a study of mankind in the ordinary business of life. It examines that part of individual and social action, which is closely connected with the attainment and use of material requisites of well-being".

Key-points Of Marshall's Definition

1. Study of an ordinary man.

2. Economics is a behavioural science.

3. Study of material welfare.

4. Economics is not simply a study of wealth.

Teacher's Note

Marshall's definition is better than Adam Smith's because it focuses on the happiness and welfare of common people, not just creating wealth. For example, good healthcare and education for all people matter more than just producing more money.

Exam Trick

Remember: Marshall = Man's welfare. He cared about making ordinary people happy through material well-being.

Points to Remember

Marshall studied the ordinary business of life, not just rich people.
His definition includes the welfare and happiness of people.
Economics should help improve the quality of life for common people.
He published his ideas in the book "Principles of Economics".

3. Lionel Robbins' Scarcity-Oriented Definition of Economics

This is the most popular definition of Economics. Robbins published his book "An Essay on the Nature and Significance of Economic Science" in 1932. He mentions the scarcity-oriented definition of Economics.

"Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses".

Key-points Of Robbins' Definition

1. Wants (ends) are unlimited.

2. Means are comparatively limited.

3. Wants are gradable on the basis of priority.

4. Means have alternative uses.

Teacher's Note

Robbins' definition is the best because it shows the real problem: we want many things but have limited money. For example, you want a mobile phone, a bicycle, and books. But you have only 5000 rupees. So you must choose what is most important.

Exam Trick

Remember: Robbins = Scarcity. Limited resources meet unlimited wants. This is the real problem of every family and every country.

Points to Remember

Robbins focused on scarcity - we have limited money and limited resources.
Our wants are unlimited - we always want more things.
We must choose which wants are most important to us.
Money can be used for different things - we must decide the best use.

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