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 not quantity. Development economics helpful to make decisions regarding the development of certain sectors like education, health, infrastructure and living standard etc. Govt. used different strategies to analyze the performance of current development policies and obtained results of these also helpful for making effective policies in future.
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 good. Producer aim is to produce more quantity of a good at minimum cost and gain maximum profit. Producer used different strategies to achieve 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 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 second is Tight Monetary Policy (When money supply decreases interest rate increases). State Govt. make decisions which kind of monetary policy being suitable to current economy scenario.
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.