To start with, lets discuss the importance of the subject. The most famous definition of Economics comes from Lionel Robbins who states that:
“Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”
To elaborate further, let us assume that you are stuck on an island alone. There is certain amount of wood that is available on the island (this is the scarce means) and this wood can be used for alternate uses – would you use the wood to burn fire? Or to make shelter? Or to make a boat to reach the nearest habitation? Thus, the limited amount of wood has number of alternate uses. In this setup, Economics guides you in analyzing the choice made by the concerned decision maker.
Another example could relate to use of land in a village. Assume that you are SDM of Rampur subdivision in Barwani. In one of its tribal villages, there is 5 bighas land that is currently beingused for cow grazing. This limited piece of government land can also be used for building a school, a hospital or an anganwadi centre. Amongst these alternate uses, the gram panchayat, with the approval of SDM and Collector, may decide to either let the land be used for cow grazing and hence allowing villagers an alternate source of income or it may decide in favour of investing in social infrastructure. While it is a difficult decision to make, Economics can assist in making the choice an informed one.
Economics is broadly divided into two fields – Microeconomics and Macroeconomics. Microeconomics deals with behavior of small units – be it household behavior or how a particular firm functions. On the other hand, macroeconomics tends to aggregate such behavior over a large sample to analyse and assess the behavior at a macro level.
In this blog, we will discuss concepts of both microeconomics and macroeconomics with a special focus on public policy making and developmental paradigms.