Similar to definitions of economics, there are a number of controversial issues related to its nature. Some economists believed economics as a science, while other believed economics as a social science.
Let us now discuss the nature of economics as follows:
Economics as a Science:
Refers to the scientific nature of economics. Some economists believed that in economics, a problem is solved by adopting a scientific approach, which involves collecting and analyzing data and making related laws and theories For example, various economists examined the concept of employment and framed relevant theories, such as Say’s law, Pigou’s modifications, and Keynes theory of employment.
Economics is considered as a science because there are similarities between the problem solving process of economics and science. Apart from this, there is another controversial issue related to whether economics is a positive or normative science.
Positive science refers to the science that deals with the question of what is, while the normative science deals with the question of what it should be. Positive science is the description of a concept whether it is right or wrong. On the other hand, normative science is the evaluation of a concept. After a very detailed analysis, it is decided that economics is a positive as well as normative science.
Economics as a Social Science:
Implies that economics is a study of behavior patterns of human beings. The basic function of economics is to study how individuals, households, organizations, and nations utilize their limited resources to achieve maximum profit. This function of economics is termed as maximizing behavior or optimizing behavior. In economics, optimizing behavior refers to selecting the most profitable alternative from the available alternatives.
Therefore, it can be said that economics is a social science that aims at studying human behavior with respect to optimal allocation of available resources to achieve maximum profit. For example, economics covers how individuals allocate their resources (income) to purchase different goods and services, so that they can achieve maximum satisfaction.
In addition, economics also studies how organizations make their decisions regarding selection of a product to be produced, production technique, plant location, and price of the product. Apart from this, economics also covers how nations utilize their resources to fulfill the needs of the society so that economic welfare can be maximized.
Branches of Economics:
Economics is a wide subject that involves several concepts, which are difficult to be studied under a single discipline. Therefore, it is classified into two branches, namely, microeconomics and macroeconomics. Microeconomics deals with the economic problems of a single industry or organization, while macroeconomics deals with the problems of economy as a whole. Both of these branches contribute a major part in business analysis and decision-making directly or indirectly.