“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 it reflects that Economics has prime importance in social sciences which can be discussed in two parts
Theoretical Importance of Economics
The study of Economics widens the mental horizon of the people because it increases mental capacity to understand various problems of life.
Spirit of Co-operation
The study of Economics realizes us that we are interdependent to meet our economic and social wants. It leads to spirit of co-operation.
An economist critically analyses the situation and then draws conclusions which provides a guide – line for successful life.
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.
Vision about Economic System
The study of Economics not only enables to understand different economic systems, i.e. capitalism, socialism, Islamic economic system but it also creates a vision to look into the working of a particular economic system.
Source of Unavoidable Information
To understand 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 these 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 of critical economic problems like poverty, inflation, monopolies, unemployment, environmental pollution etc.
Planning and development strategies, budget, monetary policy, fiscal policy etc. are major concerns of the government. Government depends heavily upon economists for policy decision – making.
The ultimate objective of a producer is to maximize profit in case of profit and minimize loss in case of loss. It is the study of Economics which provides guideline to hit the target.
Consumers are always in search of maximization of satisfactions. It is Economics which provides basic principles to maximize satisfaction.
Banking is the most challenging
Speculation, i.e. purchase and sale of shares, bonds, certificates etc. is the major feature of the present business world. It is Economics which provides outlines for speculation done by speculators
Economic tactics are the most effective tactics to win the favour of masses. Hence it is must for a successful ruler to have the awareness of at least basic knowledge of Economics.
Labourer enriched with the knowledge of Economics can realize their role and importance to the employer in production process. Hence Economics enables them to enjoy higher wages.
Knowledge of Economics is indispensable for a good citizen. Wooten has rightly remarked that:
“You cannot be a citizen in real sense unless you are at least in some degree an economist.”
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
Optimum Allocation of Resources
Optimum allocation of resources is key to economic development and the study of Economics confirms best allocation of resources.
Equitable Distribution of Wealth
Inequitable distribution of wealth has been the crucial problem of especially LDC’s. It is the study of the Economics which provides guide – line for equitable distribution of wealth.
Gate-way to Economic Development
Economic development has been the dream of all nations. It is the knowledge of Economics which serves as a gate-way to economics development.
Importance of Economics in Daily Life
Economics plays a crucial role in our daily life. Each decision like make purchase of something represents the economic implications. 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.
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 nature of product like basic goods, inferior goods and luxury goods. After seeing the importance of these goods in his daily life he makes purchases.
Example 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 make decision. So, all economic decisions 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 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 factory increased then how it affect demand for labor, product price, product demand and quality.
Macroeconomics plays significant role to analyze how disturbance in one sector transform its impacts towards other sectors of an economy.
Importance of International Economics in Daily Life
International economics is a crucial branch of economics that deals with trade of goods and services. Term of trade is the ratio of export price to import price and all trade decisions depends on this ratio.
If export price decreased then TOT decrease and this ratio become helpful to make decision of not to export a specific quantity of that commodity. Similarly if price of imported goods increase then it is easy for Govt. to make policies which restrict the import of these goods.
Example: If the price of luxury imported cars increased then Govt. make those policies which restrict the imports of these cars. Similarly appreciation of domestic currency enhances the export of certain goods.
Importance of Development Economics in Daily Life
Development economics is a 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
Example If Govt. wants to reduce poverty then those polices would be made which enhance employment, social security benefits of workers, control labor market and bring stability in wage rate. All these steps directly or indirectly become helpful to reduce poverty.
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 of regarding production of good, cost of production and minimum price of produced well.
Producer aim is 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.
Example If a producer goal is to enhance sale then he would be made those strategies which enhance good production at least cost and set reasonable prices. Mostly break even analysis 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 discuss how fluctuations in money market might influence the other sectors.
There are two kinds of monetary policy first Easy Monetary Policy (When money supply increases and interest rate decreases) while
Example If Govt. wants to enhance employment level then easy monetary policy adopted which increase in money supply and decrease interest rate. Reduction in interest rate encourages investors to take loan and extend their business which further generate employment opportunities. While reverse is happen if Govt. wants to control 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 the nations.