Engineering & Managerial Economics

8/8/2019 Engineering & Managerial Economics

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ENGINEERING &ENGINEERING &MANAGERIALMANAGERIAL

ECONOMICSECONOMICS

Introduction :The term Economics is derived from Greek Wordoikonomia which means household management.


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Adam Smith defined Economics,Adam Smith defined Economics,

As the study of the nature andAs the study of the nature andcauses of the generation of wealthcauses of the generation of wealthof a nation.of a nation.


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y

J.B. Say has defined Economics as thescience which deals with wealth.

y In fact, wealth is the focus of all classicaleconomists including Adam Smith, J.B.Say, J.S.Mill, Walker etc..


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But this definition has been criticized

on the following grounds :

y Man was ignored,

y Restricted meaning ofwealth,y Imagination of an economic man,


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1.2 Economics as a science of1.2 Economics as a science ofMaterial Welfare.Material Welfare.

y To remove the taint of gross materialism from thedefinition of economics, Alfred Marshall evolved abetter definition which shifted the emphasis from the

study ofw

ealth to the study of man.y According to Marshall, Economics is a

study of mans actions in the ordinarycourse of life. It enquires how he gets his

income and how he spends it. Thus, it ison the one hand, a study ofwealth and onthe other and more important side, a partof the study of man.


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xThe Marshallian definition is certainlyan improvement upon the earlierdefinition of economics

But this definition failed to emphasizethe problem of allocation of scarceresources which is the fundamentalproblem of a modern economy.


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y Prof. Robbins criticized Marshalls

definition on the follow

ing grounds :

1. Marshall's view of Economics is narrow and

unscientific.2. Material welfare, which cant be measured by any

scale, cant be accepted as end of economics.

3. Economics is a pure human science like physics

and chemistry which has universal applicable

laws.


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y Economics as a Science of Allocation ofScare Resources :

According to Robbins,

Economics is the science which studieshuman behaviour as a relationship between

ends and scarce means which have

alternative uses.


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y Above definition lays down the three fundamentalpropositions which constitute the structure of economics

science. Which include :

y a) Ends : Ends refer to wants. Human beings have wantswhich are unlimited in number.

y b) Means : Although wants are unlimited, yet the means

to satisfy them are strictly limited. There are certain freegoods which satisfy human wants but yet most of thingsthat we wants are scarce.

y c) Alternative Uses :The scarce means are capable ofalternative uses. If a commodity could be put only to oneuse and to none else, few economic problems would arisein its connection. After it has meet that uses, it will becomea free good and will have no further economic significance.


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Robbins definition has also beenRobbins definition has also been

criticisedcriticised on the following grounds :on the following grounds :y Robbins ends & means formulation is

not confirm.

y Robbins regards ends as given &economics is only concerned with means.

y Robbins has reduced economics merely tovaluation theory. His definition does not

cover economic grow

th & humanw

elfare.y His definition is at the same time too

narrow & too wide.


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Satisfactory Definition of EconomicsSatisfactory Definition of Economics

y According to Prof. Samuelson,

Economicsis the study of how men and society choose,

with or without the use of money, to employscarce productive resources which couldalternative uses, to produce commodities overtime, and distribute them for consumption now

and in the future among various people andgroups of society.


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y We may accept any definition of economicsif it concerns with the following features:

1) Economics is primarily concerned with thoseactivities which are related to wealth-getting andwealth-using.

2) Economics is a social science concerned with theactivities of human beings in organized societies.

3) Economics is fundamentally a study of scarcity andof the problems to which scarcity gives rise.

4) Economics is a study of human welfare. It includes

the study of how existing condition of an economycan be altered.

Engineering & Managerial Economics

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