When someone mentions economics as a subject, the most common assumption that comes to the mind of every student is that it is dull and boring. Many senior school students don’t opt for this subject because they think it is very difficult to understand its various concept. Even if they do choose the field, they doze off half the time during the classes. But, if you study it with more interest and concentration, you will notice that it is one of the most applied subjects in real life. In fact, many of our day-to-day activities involve the use of the major concepts including production, distribution, and consumption which are very helpful in taking certain decisions in our daily life.
Let us take a look at some of the major concepts that economics has taught us which are important in life:
1. Rational behavior
The first and foremost lesson that economics teaches us is the optimum utilization of limited resources, and for this, we need to adopt the rational approach. When you buy something and pay for it, you analyze the real-value of that product and whether it is worth spending that much money or not. In short, it guides us about the scarcity of resources and the alternative use of them. The reasonable mind is the proof of your education as it directs you to take right decisions by reviewing all the available possibilities.
2. Opportunity cost
When we spend money to buy a particular product, we let go of the other alternatives that we could have purchased with the same amount, this loss is referred to as the opportunity cost. It is a normal scenario that most of the people face in their life where they have to compare the value of two things and the gain that can be received from them in future. They compare the worth of the options available and make their choice. This examination quality is a significant lesson in economics.
3. Investment decisions
We all intend to invest for better and higher returns in future. Some of them may be profitable while some may result in the loss, but if you can evaluate the options available and the risk involved in each of them, then you can reduce the chances of huge loss. This knowledge of evaluation can be gained by the study of economics. You would be able to examine the different choices whether you want to invest your money in a fixed deposit, lend someone on high-interest rate, buy gold or land, etc., and simultaneously the risk involved in them.
4. Various social-economic issues
Another important concept that economics makes us aware of is the social-economic issues that we witness in everyday life. It educates us about unemployment, poverty, the gross domestic product of a country, inequality, low economic growth, and how to overcome these challenges. We think of society as a whole and work towards the betterment of it.
5. Diminishing returns
When the satisfaction gained from the consumption of a product is lower than the amount or energy spent on it, then you call it as the diminishing returns. Same way, while buying something, you evaluate the utility derived from it with each unit and the cost you are paying for it. In the beginning, benefits are higher than the value, but gradually it decreases with the continuous consumption. This law is very useful in our daily life.
6. Forecast and planning
Although no one can predict the exact future, anticipating the possibilities and preparing for it can be learned through the study of economics. Economists can speculate the future inflation or deflation a country may face and can plan the finances accordingly. It also guides you to speculate the stock market and the uncertainty involved.
During inflation, supply of money increases in the economy and the value of money decreases. People have money to spend or get loans at low interest from banks and eventually demand rises for products. Many people take wrong decisions during this time and spend or invest money in the unsuitable direction. Economics helps you to understand the concept of inflation better, and you can take accurate measures which can be beneficial for you in the long-term.
These were just a few examples to show you the importance of economics in general life. There are other theories like the role of government intervention in the economy, global economy, behavioral economy, macroeconomics, etc., which are part of the subject and are essential in practical life. We hope that the subject will interest you more now as you would start witnessing the applications of it in your life.
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