Why Study Economics



WhyStudy Economics

WhyStudy Economics

Economistsplay an important role in the economy and the society. Questions havebeen raised on what are the specific benefits on economics at theindividual, society, national and global level. Important concepts ineconomics are understood from a theoretical perspective and can beexplained through graphical representations. As a result, economic isoften referred to as dismal science. However, economic hasapplication in all aspects of life. Every aspect of personal economiclife has a relevant economic theory that come into play. Therefore,economic concepts such as opportunity cost, supply and demand forcesand market structures have application are the daily life. Ineveryone’s individual life, there are numerous constrains in thequest for perfection. Being perfect in what we do is the ultimate ofevery human being, thus the saying “if something is worth doing, itis worth doing well”. For example, time is the most importantresource to a human being. Every individual is faced with thescarcity of time, which is an important constrain to perfection.Additionally, even action in a human life involves an opportunitycost that is “the value of the next best alternative or the highestvalue alternative”. Therefore, in the quest for perfections, anindividual is forced to give up some alternatives in the use of time.In the long run, no matter what, perfection is not attainable becauseof the opportunity cost. This brings about another important economicconcept that “undertakes any activity up to the point at which themarginal benefits equals the marginal cost”. This economic ruledoes not lead human activities to perfection, although it applies inall aspects of life where perfection is applicable. Arguably, thisrule answers majority of the basic question and dilemmas thatinvolves individuals at the personal level.

Inthe modern society, education is a critical aspect of an individual’slife. At a very tender age, everyone in the modern society is madeaware of the importance of education. However, whether one should getall education possible or not can be answered based on basic economicconcepts. Despite the importance of education in the society,majority of adult do not go for advanced degrees. Despite this, thesepeople are comfortable and doing well in their professional lives.This observation is based in the fact that in any activity, no bodyis willing to continue beyond the point where the marginal cost isequal to the marginal benefit. Thus, obtaining a masters degree, aPHD, another PHD etc, will eventually result into higher marginalcost compared to the marginal benefits. This result into anothereconomic concept, the law of diminishing returns, where theprofessionalism and productivity of individual declines withadvancement in education as opposed to the benefits of learning newskills. Marginal thinking is applicable in all aspect of life, sinceit allows individuals to derive the maximum benefits from theresources at their disposal. The most important resource in dailylife is time. Through marginal thinking, individuals are do not wastetime due to sunk costs.

Owninga house is the dream of every American. While majority of Americansare able to achieve this dream, the big question has always beenwhether paying rent is wasting money. There are many benefits thatare associated with living in your own house as opposed to renting.Rent and the associated increase in the value of the house benefitthe landlords. Whether renting a house is waste of money or not canbe answered based on basic economic concepts. In any economicanalysis, the opportunity cost is an essential factor to consider.Although an owner of the house does not pay rent, he or she isrequired to pay for maintenance and repairs, mortgage, power supply,insurance and other costs. The concept is that by paying a mortgage,as opposed to paying rent, an individual is making an investment inhis own property. However, it is important to ensure that theexpenses are not equivalent to renting a house, since it is notobvious that the value of the house will appreciate. Other questionsthat basic economic can be used to answer is whether “we could notafford to but this house if we had to buy it today” and whether theinterest rates are too high. Basically, when an individual owns ahouse, he or she pays for the opportunity cost of the current valueirrespective of whether it was pain originally or at the mortgagevalue. Economics can also answer basic questions such as theimplication getting tax refunds. Although peoples are always excitedabout tax refunds, they are unaware about what is the implication. Agenuine tax refunds indicates that the individual had given thegovernment an interest free loan. This means that the individualsacrificed the opportunity cost of the excess fund. The cost incurredis the earning or benefits that could have been obtained if theindividual did not have excess payment. Due to excess tax payment, anindividual has less disposable income and thus lower net worth.

Thelist of aspects of daily life where basic economic theories areapplicable is endless. Through the study of economics, individualsare able to derive the maximum benefits from these aspects of dailylife. For example, economic principles suggest that playing a lotteryhas not significant impacts on the chances of an individual having abetter life. However, saving and identifying an appropriateinvestment can improve an individual’s life. Economics theoriesalso act as a guide to generation and accumulation of wealth,otherwise known as “getting rich”. They enable individuals totake balanced approach towards investment through diversification.

Theultimate goal of studying economics is having a career in economics.Although economics has an impact on all aspects of an individual’slife, the greatest value is obtained from a career in economics.Careers in economics are available in government agencies as well asprivate business and non business institutions. Economic careermainly involved the allocation of scarce resources in order to obtainthe maximum benefits. As a result, majority economists work inbusiness organizations and government agencies where optimization ofresources is critical.

Thearticle provides an insight on the importance of economics at theindividual level. In all aspects of life, economics plays a criticalrole. Therefore, when an individual decide to study economics, nomatter what he will do in life, the study of economics will have apositive impact on his life. Economics is concerned with currentproblems affecting individuals, societies and nations. Therefore,although there are numerous theoretical interpretations of situationsin economic studies, economics is a problem based science that dealswith the current challenges facing individuals.