Economics is defined as the study of how people or corporates use their scarce resources. Economics is a vital in our day to day lives. As such, this paper seeks to explain how the study of economics will help me in the future.
Economics will help me understand the budgetary process and how to prepare budgets. The budgetary process is covered widely and in depth in economics. This equips me with the skills and knowledge I need to understand and evaluate our countrys budget or an organizations budget. I can also use this knowledge to prepare my own budget. Alternatively, I can use my budgetary skills to prepare a budget for an organization where I am employed at a professional level.
Economics will help me understand concepts such as inflation and deflation when they happen in my society. These circumstances can be frustrating to an individual who doesnt understand why the prices of various commodities have skyrocketed. However, with my knowledge from economics, I will be able to understand what is happening.
Economics evaluates the marketing concept critically (N. Gregory Mankiw 89-99). This will help me know when I really need a commodity in order to avoid buying commodities I do not need as a result of falling victim to deceptive and persuasive marketing. My understanding that wants are insatiable, will also enable me to set limits and decide what my opportunity cost will be as I cannot have everything I want. This concept will allow me to make rational decisions between parameters or commodities that present themselves simultaneously. Knowing about opportunity cost I will choose wisely
The theory of diminishing returns will enable me to understand that once I have satisfied a want additional units may not be satisfying my wants and may even administer negative utility. This helps economists plan accordingly and know which avenues to spend their time and resources on (Mishkin ,250). This skill will be critical in my future ventures. This theory goes hand in hand with the theory of marginal utility. This concept evaluates the utility from additional unit consumed. Understanding this concept will enable me to make rational decisions with regards to where I channel my money in relation to the utility I will derive from my spent money.
My study of economics provides valuable information regarding price ceilings and price floors. With this knowledge, I can make investment decisions that will pay and have a full understanding of the price restrictions whenever they are imposed by the authorities.
Graphical Representation of Price Ceiling and Price Floor.
Source: Khan Academy.
The equilibrium point is the point where the demand and the supply of a commodity are equal. The supply and demand curves meet at this point. A Price floor is the lowest price a commodity can go for. This ensures that the price of a commodity does not go below a certain level. This price is set by the authority and aims at achieving a number of objectives, for instance, preventing the suppression of farmers or domestic industries. A scenario where price floor applies is the minimum wage. The government sets a minimum wage to ensure all the citizens are able to keep up with the rising cost of living and this actually ensures that no member of the working population lives below the stipulated poverty line (Academy). When the price floor is set above the equilibrium, there is a surplus of the commodity in question. A price ceiling is the highest price a commodity can go for. This ensures that the price of the commodity does not rise above a certain level. A price ceiling creates excess demand and hence shortage.
The study of Economics will equip me with the knowledge to understand the equation of national accounts (James , 89). This equation defines the constituents of the Gross Domestic Product (GDP). It explains the relationship between these components of the economy and the Gross Domestic Product.
Y = C + I + G + NX.
"Y" represents gross domestic product,
"C" represents consumption of the private sector,
"I" represents investment,
"G" represents government spending
"NX" is equal to exports less imports.
The taxation concept, well covered in the study of economics will enable me to be informed regarding the percentages of taxes that the government gets from my investment or personal taxable income and the relief that I am entitled to. This ensures that I understand and know the reasons for the authorities collecting tax from me.
The study of Economics provides critical information and knowledge that is essential in our day to day lives. This information helps an individual make informed decisions regarding money matters for their own wellbeing or the welfare of institutions they work at, on a professional level. This also equips them with the ability to understand what is happening in their country economical structure. An economist is a problem solver and is able to utilize the resources available to them responsibly.
Academy, Khan. "Price ceilings and price floors: How does quantity demanded react to artificial constraints in price." n.d. 12 April 2017. <https://www.khanacademy.org/economics-finance-domain/microeconomics/consumer-producer-surplus/deadweight-loss-tutorial/a/price-ceilings-and-price-floors-cnx>.
James, Thomas. "eHow." n.d. Business Finance. 12 April 2017. <http://www.ehow.com/info_8267064_equations-used-economics.html>.
Mishkin, Frederic S. The Economics of Money, Banking and Financial Markets, Global Edition. 11. Pearson Education, 2015.
N. Gregory Mankiw. Principles of Economics. 5. Vol. 1. Boston: Cengage Learning, 2008.
Sloman, John, Dean Garratt and Alison Wride. Economics. 9. Financial Times Prentice Hall, 2006.
If you are the original author of this essay and no longer wish to have it published on the customtermpaperwriting.org website, please click below to request its removal: