Definition And Scope Of Economics


Economics is a discipline that is deeply embedded in the fabric of our society, influencing the decisions we make on a daily basis, whether as individuals, businesses, or governments. At its core, Economics can be defined as the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

When we delve into the scope of Economics, we uncover a vast and intricate field that touches upon a multitude of aspects in our lives. One of the fundamental concepts in Economics is the notion of scarcity and choice. Human wants are virtually limitless, yet resources to satisfy those wants are limited. This scarcity necessitates choices to be made regarding what goods and services to produce and how to distribute them. This leads us to the concept of opportunity cost, the value of the next best alternative foregone when a decision is made.

Scale of preference is another key idea in Economics, highlighting the ranking of wants or needs in order of priority. This ranking guides individuals, firms, and governments in allocating resources efficiently. The production possibility curve is a visual representation of the maximum combination of goods and services that can be produced with a given set of resources, showcasing the trade-offs that exist due to scarcity.

Economics delves into economic activities encompassing production, distribution, and consumption. These activities drive the economic engine of a nation, determining the levels of output, income, employment, savings, investment, and foreign exchange. The classification of economic activities into primary, secondary, and tertiary sectors showcases the diverse contributions of different sectors to the economy.

Understanding Economics is crucial as it provides individuals and organizations with insights into the implications of their decisions. By studying Economics, we gain a deeper understanding of how resources are allocated, how prices are determined, and how policies can impact economic outcomes. Ultimately, Economics serves as a guiding light in decision-making processes across various spheres of life.


  1. Identify the importance of Economics in decision making
  2. Recognize the various aspects of Economics in everyday life
  3. Understand the definition of Economics
  4. Explore the scope of Economics

Lesson Note

Economics is a broad field that encompasses various theories, models, and principles that seek to understand how societies use their resources. By studying economics, we gain valuable insights into how to allocate resources efficiently to meet the diverse wants and needs of individuals and society as a whole. The decisions made by individuals, businesses, and governments can shape the economic landscape in profound ways.

Lesson Evaluation

Congratulations on completing the lesson on Definition And Scope Of Economics. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.

You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.

Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.

  1. Economics is best defined as: A. The study of how to make money B. The study of how society allocates scarce resources C. The study of business management D. The study of history Answer: B. The study of how society allocates scarce resources
  2. The scope of Economics includes the study of: A. Production and consumption of goods and services B. Geology and astronomy C. The study of ancient civilizations D. Engineering principles Answer: A. Production and consumption of goods and services
  3. Which of the following is NOT a basic economic problem? A. Distribution of wealth B. Scarcity of resources C. Unlimited wants D. Limited resources Answer: A. Distribution of wealth
  4. The concept of opportunity cost relates to: A. The benefits of a chosen alternative B. The value of the best alternative forgone C. The actual cost of an item D. The price of a product Answer: B. The value of the best alternative forgone
  5. The Production Possibility Curve (PPC) shows the: A. Different preferences of consumers B. Maximum combination of goods that can be produced with limited resources C. Price changes over time D. The total revenue of a company Answer: B. Maximum combination of goods that can be produced with limited resources
  6. Economic activities involve: A. Only the production of goods B. Creating a balance between wants and needs C. Distribution and consumption of goods and services D. Planning for future investments Answer: C. Distribution and consumption of goods and services
  7. The Classification of Economic Activities into primary, secondary, and tertiary sectors is based on: A. Geographic locations B. The level of education required for the activities C. The skill level of the labor force D. The nature of the economic activities Answer: D. The nature of the economic activities
  8. The Primary sector mainly includes activities related to: A. Manufacturing and construction B. Extracting raw materials C. Retail and wholesale trade D. Information technology services Answer: B. Extracting raw materials
  9. The Tertiary sector contributes significantly to the economy through: A. Providing goods for immediate consumption B. Creating employment opportunities C. Exporting raw materials D. Investing in the stock market Answer: B. Creating employment opportunities

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Past Questions

Wondering what past questions for this topic looks like? Here are a number of questions about Definition And Scope Of Economics from previous years

Question 1 Report

When the demand for foreign exchange exceeds its supply, the value of the domestic currency

Question 1 Report

Multiplier can be described as

Question 1 Report

a. What is money?

b. Explain the following concepts:
i. value of money:
ii. demand for money,

(c) ldentify any four determinants of transaction demand for money

Practice a number of Definition And Scope Of Economics past questions