Why do we study economics

Why Do We Study Economics? Explained in 3 Minutes

Why do we study economics? The main reason why we study economics is to find the solution to problems, which includes, what to produce, how to produce it, how to distribute the national income, how to dispose of one’s personal income, etc.

Today, we live in an interconnected world where every decision has the ability to impact others and the environment we live in today. From local businesses to governments around the world, economics helps us understand how people use and produce resources and why they make the decisions they do.

In this article, we’ll discuss why we need to study economics – even if you’re not going to be an economist.

Economics focuses on how people use and produce resources. It can help us understand how the world works and make better decisions about our own lives, as well as help, make the world work better together. These are some of the reasons why you should consider studying economics in college.

What is Economics?

Economics is the social science that studies human behavior as it relates to production, consumption, and trade. As a result, economics has a lot to say about topics like poverty, education, health care, housing markets, unemployment rates, pollution levels, economic growth rates, the list goes on.

why we study economics

Economists take a very analytical approach to these issues by studying everything from supply and demand for goods to how much money we have daily in our wallets. And because economists are so skilled at gathering data and analyzing the numbers, they’re often called upon to give advice or recommendations for governments or companies on various subjects.

Some economists work for government agencies such as the Bureau of Labor Statistics, Bureau of Economic Analysis, or U.S. Census Bureau; others work at think tanks; some may be consultants with multinational corporations; still, others may be professors in universities around the world or high school teachers where they teach economics courses and their students go on to become economists themselves.

No matter what path an economist takes, there’s always one goal: understanding the big picture.

Economics is a science of scarcity and choice. In order to know more about the importance of economics and why we study it, we need to learn more about scarcity, choice and opportunity cost.

Scarcity

Scarcity refers to the ability to economize our resources as humans and being able enables one between the competing alternative. Generally, human beings have the inability to provide themselves with all things they want or desire, and the basis for this problem is that these material wants are unlimited, while the means or resources to satisfy them are scarce

Choice

Choice refers to the ability to distribute our resources, including money, among different competitive economic ends. Basically, when we choose one thing, we have to sacrifice some other thing because we do not have enough resources to satisfy both needs and wants at a time.

The bottom line here is we have limited resources relating to our wants, and so we have to choose

Opportunity Cost

Economists emphasize that the actual cost of anything is the opportunity missed in buying its alternative. If we choose to have one thing or more of one thing, we necessarily have to forgo others or have less of them. The sacrifice we make in terms of what we can obtain is the opportunity cost.

For example, if a student has five enables to buy a book or a shirt, he has made a sacrifice when he decides to buy one. If he chooses to buy a shirt instead of a book, he sacrifices the book in order to obtain the shirt.

The opportunity cost, in this case, refers not to the price of the shirt, which is N5, but to the alternative, the book, which the student forgoes in order to buy the shirt. N5naira is the monetary cost of the shirt, but its actual cost is the book that the student has to forgo in order to purchase it.

Why do we study economics?

We need to study economics to study the allocation of a society’s limited resources among alternative uses and how to distribute the output among individuals and groups to society.

The following are the most important reasons why we study economics

1. Economics gives us the ability to think

Studying economics enables us to think. We can apply its principle to solve practical problems and thus avoid unnecessary and costly mistakes.

2. Economics gives us a better understanding

Another reason why we study economics is that it gives us a better understanding. The study of economics enables an individual to understand better the relationship between himself and his fellow human beings in his effort to make a living which in turn may have a beneficial effect on his personal progress.

3. Economics enables us to make the right decisions

One of the reasons why we need to study economics is to make the right decisions. The study of economics enables us to make the right decisions on how to spend our money. It does not make us a miser, but rather, it enables us to ensure that we derive maximum satisfaction from the money we spend on anything.

4. Economics enables us to have a better understanding of government policy

Another reason why we study economics is that economics enables us to detect and point out the advantages as well as the disadvantages of any government policy concerning the community and society at large.

It is the aim of economics as a discipline to build up a body of principles and to furnish the economist with the tools of economic analysis that will enable them not only to understand current economic problems but also to see the economic consequences of pursuing a particular line of policy.

5. Economics allows us to give practical advice

When we study economics, it enables us to give practical advice. Generally, society is facing problems of choice and scarcity.

The economist, therefore, advises the individual or government, which represents the society, to choose that which will give maximum satisfaction in terms of available resources; according to Sir Henry Clay, who said that:

“Some study of economics is at once a practical necessity and a moral obligation.”

Sir Henry Clay

The bottom line is this; economic questions touch our daily lives, which we cannot deny.  

Summary

In summary, economics is the study of how people use and produce resources—from food to fuel to financial capital. It helps us know and understand how the world works and make better decisions, whether it be about things we buy or the way our country runs its economy.

Studying economics can be a fulfilling lifelong pursuit, or it may just provide some insight into what’s happening in the world around you. Remember: knowledge is power.

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Tofunmi

Tofunmi is a BA, MBA, and experienced Researcher in Business Administration and Management. He possesses outstanding communication, leadership, conflict resolution, organization, and teamwork skills. He enjoys teaching and reading books on startups, business, personal finance, investment, and more.