Answer to Question #85954 in Economics of Enterprise for Tamunosiki Minaye-ilombo

Question

Discuss the scope of economics including the traditional division of economics

Answer 1

According to the old view, the study of Economics is divided into four main departments or divisions, viz., Consumption, Production, Exchange, and Distribution. In Consumption, we study the nature of human wants as well as the principles governing their satisfaction. The law of diminishing marginal utility, law of Substitution, the law of family expenditure and consumer’s surplus are of special importance. We also study the nature of demand, whether it is elastic or inelastic, as well as the law of demand.

In Production, we study how man makes efforts to satisfy his wants by producing wealth. In particular, we see how the four agents of production, viz., land, labour, capital and organisation, co-operate and combine in the work of production. We study each of these agents, their importance and the conditions of their efficiency.

In the third department of Economics, viz., Exchange, we discuss how in the various market forms buying and selling are done and how prices are determined. This happens through the interaction of the forces of demand and supply.

The fourth department, Distribution, is devoted to the study of the respective shares that go to the four agents—land, labour, capital and organization. These shares take the form respectively of rent, wages, interest and profit. In Distribution, we study how the share of each agent of production is determined.

Source:

http://www.economicsdiscussion.net/essays/essay-on-economics-nature-and-scope-of-economics/1438