Subject matter of Economics

Subject matter of Economics:-

As economics is the process of continuous development, it's subject matter is increasing. A deeper study into any subject matter can make its scope wider. Basically, there are two approaches to the study of the subject matter of Economics:-

1) Classical/ Traditional approach
2) Modern approach

1) Traditional approach:-

Under the traditional approach basis, there are following subject matters of Economics:-

a) consumption:-
The act of satisfying human wants through the use of goods and services is known as consumption. Under this, the law of consumption, the law of demand, the law of substitution, etc. are studied.

b) Production:-
The creation of utility is known as production. Under this, the theory of production, factors of production, laws of returns, etc are studied.

c) Exchange:-
The loss of a good with associated capture of another is known as an exchange. Under this, forms of market, price determination, trade, money, banking, etc are studied.

d) Distribution:
The process by which goods and services are dispersed to market is known as distribution. The problems related to sharing for each factor of production, i.e. rent, wage, interest, and profit.

e) Public Finance:-
It studies the income and expenditure of the government. Under this, public revenue, public expenditure, public debt, etc are included.

2)The modern approach:-

Under this approach basis, there are the following two subject matters of economics:-

a)Micro Economics:-
The word 'Micro' is derived from the Greek word 'Mikros' which means tiny or small. Hence, microeconomics studies small unit of economic analysis, such as a particular consumer, individual firm, market, industry, etc.

According to K.E Boulding, "Microeconomics is the study of particular firms, particular households, individual prices, wages, income, individual industries, particular commodities."

In the words of A.P Larner, "Microeconomics consists of looking economy through a microscope."

b) Macro Economics:-
The word 'Macro' is derived from the Greek word 'Makros' which means broad or large. Macroeconomics is related to aggregate economic activities and studies the entire economic activities collectively. It collectively studies national income, employment, national output, price level, total saving, total investment, etc.

According to K.E Boulding, "Macroeconomics deals not with individual quantities as such but with an aggregate of those quantities, not with individual income but with the national income, not with individual prices but with the price level, not with individual output but with the national output."

According to R.G.D Allen, "The term 'Macroeconomics' applies to the study of the relationship between broad economic aggregates."