“Political economy is perhaps the only science of which it may be said that the ignorance of it is not merely a deviation of good but produces great positive evil.”
In the words of Malthus,
“Economics is the intellectual religion of the day.”
Durbin
“The study of Economics is a practical necessity and a normal obligation.”
Sir Henry Clay
All of it reflects that Economics has prime importance in social sciences which can be discussed in two parts
Theoretical Importance of Economics
Intellectual Development
The study of Economics widens the mental horizon of people because it increases their mental capacity to understand various problems of life.
Spirit of Co-operation
The study of Economics realizes that we are interdependent to meet our economic and social wants. It leads to the spirit of cooperation.
Critical Analysis
An economist critically analyses the situation and then draws conclusions that provide a guideline for a successful life.
Rationality
The study of Economics teaches rationality, i.e. to avail the best possible situation within the given conditions.
Sense of Responsibility
Economics teaches us that we have to meet our unlimited wants with limited resources. It creates a sense of responsibility which in turn makes a person a better citizen.
The vision of the Economic System
The study of Economics not only enables us to understand different economic systems, i.e. capitalism, socialism, and Islamic economic system but it also creates a vision to look into the working of a particular economic system.
Source of Unavoidable Information
Understanding some problems like inflation, exchange rate, shares, BOP, deficit financing, etc. has become unavoidable for a successful life. Economics is the major source of all this inevitable information
Practical Importance of Economics
To Understand Other Subjects
The study of Economics is very useful to understand other subjects like history, sociology, psychology, etc.
Solution of Economic Problems
The study of Economics provides the solution to critical economic problems like poverty, inflation, monopolies, unemployment, environmental pollution, etc.
Government
Planning and development strategies, budget, monetary policy, fiscal policy, etc. are major concerns of the government. The government depends heavily upon economists for policy decision-making.
Producers
The ultimate objective of a producer is to maximize profit in case of profit and minimize the loss in case of loss. It is the study of Economics that provides guidelines to hit the target.
Consumers
Consumers are always in search of maximization of satisfaction. It is Economics that provides basic principles to maximize satisfaction.
Bankers
Banking is the most challenging
Speculators
Speculation, i.e. purchase and sale of shares, bonds, certificates, etc. are a major feature of the present business world. It is Economics that provides outlines for speculation done by speculators
Rulers
Economic tactics are the most effective tactics to win the favor of the masses. Hence it is a must for a successful ruler to have the awareness of at least basic knowledge of Economics.
Labour
Laborer enriched with the knowledge of Economics can realize their role and importance to the employer in the production process. Hence Economics enables them to enjoy higher wages.
Citizen
Knowledge of Economics is indispensable for a good citizen. Wooten has rightly remarked that:
“You cannot be a citizen in the real sense unless you are at least in some degree an economist.”
Global Supremacy
Global supremacy is possible only on the basis of advanced studies in Economics. For instance, G-8 countries are enjoying global supremacy on the basis of the
Optimum Allocation of Resources
The optimum allocation of resources is key to economic development and the study of Economics confirms the best allocation of resources.
Equitable Distribution of Wealth
Inequitable distribution of wealth has been a crucial problem, especially LDCs. It is the study of Economics that provides guidelines for the equitable distribution of wealth.
Gateway to Economic Development
Economic development has been the dream of all nations. It is the knowledge of Economics that serves as a gateway to economic development.
Importance of Economics in Daily Life
Economics plays a crucial role in our daily life. Each decision like making a purchase of something represents the economic implications. The importance of economics in daily life can be analyzed by seeing its implications among its different branches. The important branches of economics are Micro, Macro, Managerial, Monetary and International economics, etc.
| Branch of Economics | Role of Economics |
|---|---|
| Microeconomics | Consumer Level Study |
| Macroeconomics | Study of National Level |
| International Economics | Import-Export or International Trade |
| Development Economics | What Developments are to be made |
| Managerial Economics | Focuses on Cost Reduction |
| Monetary Economics | Running Money Market |
Importance of Microeconomics in Daily Life
Microeconomics is a branch of economics that deals with small units of an economy like consumer, producer, monopolist, oligopolistic, and consumer welfare decisions.
Certain consumer analysis depends on the nature of products like basic goods, inferior goods, and luxury goods. After seeing the importance of these goods in his daily life he makes purchases.
For example, the consumer spends his limited income in such a way that he obtains maximum satisfaction from it. If a person wants to purchase a bike or car. Firstly, he estimates its cost and benefits then makes a decision. So, all economic decisions are based on cost-benefit analysis.
Importance of Macroeconomics in Daily Life
Macroeconomics is a branch of economics that deals with aggregate parts of an economy like Income, Inflation, Unemployment, Growth rate, and Business Cycles. Macroeconomics deals with how disturbance in one term or sector might affect the whole economy.
Example: Inflation in one sector simultaneously influences the other sectors of an economy. In our daily life if the cost of shoe-making factories increases then how does it affect demand for labor, product price, product demand, and quality?
Macroeconomics plays a significant role to analyze how disturbance in one sector transforms its impacts on other sectors of an economy.
Importance of International Economics in Daily Life
International economics is a crucial branch of economics that deals with the trade of goods and services. The term trade is the ratio of export price to import price and all trade decisions depend on this ratio.
If the export price decreases then TOT decrease and this ratio become helpful to make the decision not to export a specific quantity of that commodity. Similarly, if the price of imported goods increases then it is easy for Govt. to make policies that restrict the import of these goods.
Example: If the price of luxury imported cars increases then Govt. makes those policies that restrict the imports of these cars. Similarly, the appreciation of domestic currency enhances the export of certain goods.
Importance of Development Economics in Daily Life
Development economics is the most important branch of economics that deals with qualitative terms,
Govt. used different strategies to analyze the performance of current development policies and obtained results of these also helpful for making effective policies in the
For example, If Govt. wants to reduce poverty then those policies would be made which enhance employment, and social security benefits for workers, control the labor market and bring stability to the wage rate. All these steps directly or indirectly become helpful to reduce poverty.
Read more about wages in different states of the US
- https://businessfinancearticles.org/minimum-wage-in-georgia
- https://businessfinancearticles.org/minimum-wages-in-illinois
- https://businessfinancearticles.org/minimum-wage-in-louisiana
- https://businessfinancearticles.org/minimum-wage-in-tn
- https://businessfinancearticles.org/minimum-wage-in-indiana
- https://businessfinancearticles.org/minimum-wage-in-virginia
- https://businessfinancearticles.org/what-is-the-minimum-wage-in-texas
Importance of Managerial Economics in Daily Life
Managerial economics is to some extent similar to microeconomics, in this branch of economics managerial decisions are made on the basis of cost-benefit analysis. Producers used these analyses to make certain decisions regarding the production of goods, cost of production, and minimum price of produced well.
Producers aim to produce more quantity of a good at a minimum cost and gain maximum profit. The producer used different strategies to achieve the desired goals.
For example, If a producer’s goal is to enhance sales then he would be made those strategies that enhance good production at the least cost and set reasonable prices. Mostly break-even analysis is used to make those strategies.
Importance of Monetary Economics in Daily Life
Monetary economics is the most crucial branch of economics that deals with the monetary policies of an economy. Monetary economics discusses how fluctuations in the money market might influence other sectors.
There are two kinds of monetary policy first Easy Monetary Policy (When money supply increases and interest rate decreases) while the second is Tight Monetary Policy (When money supply decreases interest rate increases). State Govt. make decisions about which kind of monetary policy is suitable to the current economic scenario.
For example, If Govt. wants to enhance the employment level then an easy monetary policy is adopted which increases in money supply and decreases the interest rate. Reduction in interest rates encourages investors to take loans and extend their business which further generates employment opportunities. While the reverse happens if Govt. wants to control the inflation rate.
Finally, The above – mentioned facts reveal that human welfare is the direct and primary concern of Economics. Hence Economics is an extremely important and useful subject for all times and for all nations.
Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger
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