Summary on economics and scope and methodology of economics Student: Tran Van Quyet ID: 5101 -3744 1- Definition

of Economics Economics is the social science that is concerned with the production, distribution and consumption of goods and services. Economics aims to explain how economies work and how economic agents interact. Economic analysis is applied throughout society, in business, finance and government, but also in crime, education, the family, health, law, politics, religion, social institutions, war, and science. The expanding domain of economics in the social science has been described as economic imperialism. 2- The scope and methodology of economics The horizon of economics is gradually expanding. It is no more a branch of knowledge that deals only with the production and consumption. However, the basic thrust still remains on using the available resources efficiently while giving the maximum satisfaction or welfare to the people on a sustainable basis. Given this, we can list some of the major branches of economics as under: 1. Microeconomics: This is considered to be the basic economics. Microeconomics may be defined as that branch of economic analysis which studies the economic behaviour of the individual unit, may be a person, a particular household, or a particular firm. It is a study of one particular unit rather than all the units combined together. The microeconomics is also described as price and value theory, the theory of the household, the firm and the industry. Most production and welfare theories are of the microeconomics variety. 2. Macroeconomics: Macroeconomics may be defined as that branch of economic analysis which studies behaviour of not one particular unit, but of all the units combined together. Macroeconomics is a study in aggregates. Hence it is often called Aggregative Economics. It is, indeed, a realistic method of economic analysis, though it is complicated and involves the use of higher mathematics. In this method, we study how the equilibrium in the economy is reached consequent upon changes in the macro-variables and aggregates. The publication of Keynes General Theory, in 1936, gave a strong impetus to the growth and development of modern macroeconomics.

3. International economics: As the countries of the modern world are realising the significance of trade with other countries, the role of international economics is getting more and more significant nowadays. 4. Public finance: The great depression of the 1930s led to the realization of the role of government in stabilising the economic growth besides other objectives like growth, redistribution of income, etc. Therefore, a full branch of economics known as Public Finance or the fiscal economics has emerged to analyse the role of government in the economy. Earlier the classical economists believed in the laissez faire economy ruling out role of the government in economic issues. 5. Development economics: As after the second world war many countries got freedom from the colonial rule, their economics required different treatment for growth and development. This branch developed as development economics. 6. Health economics: A new realisation has emerged from human development for economic growth. Therefore, branches like health economics are gaining momentum. Similarly, educational economics is also coming up. 7. Environmental economics: Unchecked emphasis on economic growth without caring for natural resources and ecological balance, now, economic growth is facing a new challenge from the environmental side. Therefore, Environmental Economics has emerged as one of the major branches of economics that is considered significant for sustainable development. 8. Urban and rural economics: Role of location is quite important for economic attainments. There is also much debate on urban-rural divide. Therefore, economists have realised that there should be specific focus on urban areas and rural areas. Therefore, there is expansion of branches like urban economics and rural economics. Similarly, regional economics is also being emphasised to meet the challenge of geographical inequalities. There are many other branches of economics that form the scope of economics. There are welfare economics, monetary economics, energy economics, transport economics, demography, labour economics, agricultural economics, gender economics, economic planning, economics of infrastructure, etc. 3- Methodology of Economics
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Economics is also like a science but it is a social science. It deals mainly with the human behaviour. Therefore, many economists argue that economics cannot be as precise a science as the natural sciences like physics, chemistry etc. The latter can be studied in the laboratory conditions where variables can be easily controlled during experiments. However, social sciences like economics cannot be easily controlled. Still over a period of time economic sciences have gained maturity to develop its methodology which is proving now to be quite efficient and such methodologies can be used for efficient analysis of the economic relationships and predictions can be made with sufficient accuracy that generate a sense of confidence and faith. There are two broad methods used in the economic sciences. 1. The deductive method 2. The inductive method 1. The deductive method: This method involves going from general to particular. Certain hypotheses or postulates regarding human behaviour are taken to be true and then with the help of logical reasoning and examination, we try to figure out the cause and effect relationship between the factors under consideration. The following steps are involved in the deductive method. I. Firstly, a problem needs to be identified and then it should be properly specified for the study. II. The assumptions required in the study should be clear. Appropriate assumptions are crucial in economic analysis. III. After specifying the assumptions, hypotheses should be clearly framed. The hypothesis formulation requires likely relationship among the different economic variables. IV. In the last phase, hypotheses should be tested through different tools like mathematical economics and econometrics. V. Based on the above analysis proper inference needs to be derived for specific economic decision making. 2. The inductive method: Although deductive method has strong points of merit to depend upon, this methodology seems to suffer from certain weaknesses. Therefore, economists belonging to the historical school and many other economists have favoured the inductive or empirical method. The method of induction involves going from particular to general. Here the appeal is to facts, rather than reasoning and an attempt is made to arrive at conclusions from the known facts of actual life. The inductive method required the following steps:

I. The first step, as under the deductive method, is selecting and specifying the problem that is to be studied. II. The second step involves collection of data pertaining to the problem selected for study. III. The stage of collection is followed by classification and then analysis of the data by appropriate statistical techniques. IV. The fourth stage is that of inference, i.e. drawing conclusions from the statistical analysis conducted. The conclusions are presented in the form of economic generalisation