The nature and scope of economics can be understood by the study of the following points:
- What is the subject matter of economics?
- What is economic problem and why does it arise?
- Whether economics can solve practical problems?
- Is economics a science or an art?
- If economics is a science, what kind of science is it?
- Whether economics is a social science?
Classists considered economics as a science of wealth, while Neo-Classists called it "the science of material welfare of the people and gave secondary status to the wealth or considered it as a means of getting material welfare". Professor Lionel Robbins defined it as a science of scarcity and choice-i.e., how maximum of the desires can be satisfied with the limited resources J.M. Keynes called it "the science of the determination of income and employment level". All this discussion comes to the point that basically economics is the science of wealth because wealth is the only means by which material welfare of people can be maximized, maximum possible desires can be satisfied and desired level of income and employment can be achieved. Because Robbins' view is commonly accepted, therefore, the subject matter of economics is also his view. Thus, in economics the behavior of the human being is studied which he adopted as a relationship between scarcity of means and multiplicity of ends. Means like time, money, wealth and natural resources are limited while human desires are unlimited. Therefore, a question arises that how the resources are allocated to satisfy maximum of wants?
Simply, economics is related with the decision what should be produced, how should be produced, for whom should be produced and when should be produced. Further, how the scarce resources should be used to increase the level of economic development target. Thus, in the subject matter of an economy following points are discussed:
1. Optimum Utilization of Resources:
The economy should use natural, human and artificial resources in such a way that there should not be any misuse or waste of these resources. That is, the economy must endeavor to achieve full employment not only of labour but of all its resources.
2. What Commodities to be Produced?
Any economy decides to the quantity and the type of goods to be produced. Since means are scarce, the economy chooses between different alternative collections of goods and services that may be produced. Basic needs are produced on preference basis for this purpose price theory is taken into study.
3. In what Quantity to be Produced?
After deciding the production of goods, quantity to be produced is decided. For this purpose degree of demand is kept in view to avoid from over production.
4. How to Produce?
After deciding the goods to be produced and their quantity, the economists or experts determine the techniques of production to be used, e.g., labour-intensive or capital-intensive. For this purpose we study production of wealth.
5. Where and When to be Produced?
The next decision about goods to be produced is to decide proper place and time for production. For this purpose the experts take in to account means of transport and communications, availability of raw material and laborers, and market conditions, etc. Similarly, they also keep in view the weather, customs, traditions and fashion, etc.
6. How to Distribute the Produce?
As the production of goods is the result of joint efforts of factors of production like land, labour, capital and organization, therefore, it must be distributed among them according to their contribution. For this purpose theories of distribution of wealth help the experts.
After keeping all above problems in view it becomes necessary to keep expanding or developing the production., consumption, exchange and distribution. Standard of living of the people, economic growth and development must be kept to continue to the higher possible level.