Wealth Definition

Adam Smith, considered to be the founding father of modern Economics, defined

Economics as the study of the nature and causes of nations wealth or simply as
the study of wealth.

According to Adam Smith Goods have both value-in-use (utility) and value-in-exchange
(price). In this definition Smith has tried to explain the factors which are responsible for the
generation of wealth. He argued that the larger amount of wealth and betterment of the whole
society could be achieved by efficient allocation of resources.
Criticism
Narrow meaning of wealth
According to this definition wealth means only tangible goods such as apple, furniture, desk,
fan etc. Non material goods or services like that of doctor, nurse, lawyer etc. have been
excluded from it
More emphasis on wealth
This definition has given more importance to wealth than to man. Wealth takes precedence
over man. In fact, wealth is a means to satisfy mans wants. Man, not wealth should have
been given greater importance
Welfare Definition
It enquires how man gets his income and how he spends it. Thus it is on the one hand the
study of wealth and on the other and most important side, a part of the study of man.
Importance to the study of Man
These definitions have accorded more importance to the study of man than to
wealth. Wealth is merely a means to satisfy wants of the man
Ordinary business of life
This means those economic activities of man which are mostly concerned with
wealth getting and wealth spending
A stress on the role of man: These definitions stressed on the role of man in
the creation of wealth or income.
Economics Studies only the Economic Activities. Economics studies only
those economic activities that promote material welfare of human being. Thus,
non-economic activities are not included in the scope of economics.
Criticism
Economics is only a Positive Science
Economics is the function of Ethics. Economics does not give any clue to solve
economic problems. It is neutral between ends. It is wrong to call it normative
science or an art.
Scarcity Definition
Economic Problem

When all four characteristics of human life; namely, unlimited wants, scarce
means, alternative uses of means and different urgency of wants become
operative, there arises the problem of choice. One has to make choice as to
which want to be satisfied first and by what means. Problem of choice making is
called economic problem
Study of Human Behavior
The definition has a study of human behavior instead of a study of a social man.
Economics studies the economic activities of all human beings whether living in
or out of society. Economics studies the behavior of man both at individual
and social level
Criticism
Ignores Social Aspect of Economic Activities
Robbins definition ignores the social aspect of economic activities. Robbin is
wrong when he holds that the activities of those who live outside the society also
form part of the study of economics. Need of the study of economics is felt only
when economic problems assume social significance
Impractical
This definition has rendered economic as impractical subject. It is known to all of
us that want are unlimited and means are scarce. Economic cannot give any
advice in this respect. If it is so, then economics has no practical utility
Robbins has imagined a very Rational Man. According to the definition of
Prof. Robbins, a man allocated his scarce resources most efficiently so that he
may satisfy most of his wants. Thus, Prof. Robbins imagines that a man always
behaves rationally. But the practical experience of life does not prove this
imagination.
Development and Growth Definition
Economic resources
These definitions underline the point that economics is astudy of economic
resources.
These
economic
resources
refers
to
natural,
humanand physical resources
which satisfy human wants but are
scarce and havealternative uses.
Efficient allocation of resources
Choice making is the main problem of economics. Efficient allocation and use
are the chief objectives of choice making
Full utilization of resources
According to growth oriented definitions,economics is not concerned with the
allocation of resources only but also withtheir full use and employment

Managerial Economics has been described as economics applied to decisionmaking. It may be viewed as a special branch of Economics. However, the main
points of differences are the following:
1. The traditional Economics has both micro and macro aspects whereas Managerial
Economics is essentially micro in character.
2. Economics is both positive and normative science but the Managerial Economics
is essentially normative in nature.
3. Economics deals mainly with the theoretical aspect only whereas Managerial
Economics deals with the practical aspect.
4. Managerial Economics studies the activities of an individual firm or unit. Its
analysis of problems is micro in nature, whereas Economics analyzes problems both
from micro and macro point of views.
5. Economics studies human behaviour on the basis of certain assumptions but
these assumptions sometimes do not hold good in Managerial Economics as it
concerns mainly with practical problems.
6. Under Economics we study only the economic aspect of the problems but under
Managerial Economics we have to study both the economic and non-economic
aspects of the problems.
7. Economics studies principles underlying rent, wages, interest and profits but in
Managerial Economics we study mainly the principles of profit only.
8. Sound decision-making in Managerial Economics is considered to be the most
important task for the improvement of efficiency of the business firm; but in
Economics it is not so.
9. The scope of Managerial Economics is limited and not so wide as that of
Economics.