According to Adam Smith, the father of modern economics, economics is "the study of the nature and causes of the wealth of nations." Lionel Robbins defined it as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses."
In essence, economics is the social science that analyzes how individuals, businesses, governments, and societies allocate limited resources to satisfy unlimited wants and needs. It encompasses studying the production, distribution, and consumption of goods and services.
The role of economics in decision-making is paramount. Individuals and businesses make daily decisions based on economic principles to maximize utility or profit while minimizing costs. Governments also rely on economic analysis to formulate policies to achieve various objectives such as economic growth, price stability, and income distribution.
Economics provides tools like supply and demand analysis, cost-benefit analysis, and marginal analysis to assess alternatives and make rational choices in the face of scarcity. As a result, understanding economics helps make informed decisions at both individual and societal levels, leading to better resource allocation and improved welfare.
