Answer to Question #140788 in Microeconomics for fredrick

Question

Discuss the fundamental reasons why we study Economics.

Answer 1

The study of economics is of a fundamental importance in people's daily lives, in business organisations, international corporations, and the government by helping in understanding the complex economic and social environments, promoting formulation of strategies and the making of informed decisions, and assisting in making predictions about the future.

Economics influence business success. The use of theories and models in economics helps understanding consumers and competitors in business and hence the ability to predict future changes, and in formulating necessary strategies. As an example, the theory of consumer behaviour helps in understanding the consumer, and the theory of the firm helps understanding the behaviour of competitors. As a result, business strategies become easy to formulate.

More so, international corporations, investors, and governments gain an international perspective. Economics help in understanding both domestic and international, historic and current economic, cultural, and social perspectives. As an example, both business organisations and the governments would understand and trace the impact of exchange rate and global finance dynamics on businesses and domestic economies so as to predict possible problems and to take corrective actions. Investors would be able to study international finance and interest rate dynamics so as to invest diligently. Thus, the understanding of interest rate theories, exchange rate theories, derivatives, and other international financial aspects will be facilitated and is important in this analysis.

More so, economics influence our daily lives. Consumers will be able to get answers pertaining the complex social and political issues surrounding them. Economics makes it easy to understand why unemployment, inflation, income inequalities, market dynamics, price fluctuations, tax systems, and social ills such as theft, drug abuse, and prostitution exist. This understanding will also influence the ability by households to predict future changes in economic and social variables given existence of certain conditions. Concisely, understanding of economic systems, market theories, unemployment, inflation, and economic growth theories will, amongst other aspects, help people in their daily lives.

More so, economics is found useful in companies and governments, in general. The application of economic intelligence and use of data modeling to analyse and predict variables helps business in policy and strategy formulations. As an example, every central bank and international bank has economic advisors and intelligence personnel whose primary role is to advice bank managers with expert advice. Most big companies, as well, have economists who help in business strategies formulation, for example, pricing, production and promotional strategies. Data modeling helps economists develop forecasts and a clear impression in the movement of economic variables.

In addition, the industry in general cannot work without economists. Agricultural and industrial economics help in understanding and measuring the marginal productivity of factors, marginal revenue behaviour, marginal costs and how diminishing returns and returns to scale operates. Deciding when and how to employ a factor input, and when or how to expand capacity will therefore be purely economic decisions. Thus, the primary goal of maximising profits in industries cannot be achieved by trial and error but by deep understanding of production economics.

Therefore, the study of economics helps people to understand the environment around them, it helps corporates, investors, and governments in decision making, policy and strategy formulation, and to attain corporate set goals. Consumers would need economics to make informed decisions, businesses and governments need economic advisors and intelligence, investors need economic knowledge to understand aggregate variables affecting their decision, and the global community needs to understand each other. Financial aids and donations are all influenced by the understanding of world economics.

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https://www.durhamisc.com/blog/why-is-it-important-to-study-economics