Question

why do we need to study Economics? What was the major economic decisions you made in the past two years?

Answer 1

We need to study economic to get answers of the economic problems and make rational decisions. It is done using different principles of economics, theories of economics and behavior of firms, households, institutions such as central banks (Federal Reserve in the USA) and the government. when economics is studied at households and firm level to answer questions like what to produce, how much to produce and for whom to produce, then micro-economic is studied. When, government action plan and Fed's initiatives are to be studied to understand economic aggregates such as GDP, per capita income, employment and inflation like indicators, then we study macroeconomics. These economics topics play also a very important role in making decisions in our day to day lives as well. We apply opportunity cost principle, marginal principle and trade off principle to take informed and right decisions to bring more benefits. So, these are some of the reasons, benefits and causes, for that we need to study economics.

The first major economic decision was to either continue in the existing job or pursue my own business. Using economic theories of economic profit, implicit and explicit cost, I came to find that accounting profit is more with the business, but economic profit is less with the business and on this basis, I applied trade off principle. I got the realization that it is my existing job that is more suitable and beneficial than pursuing a new business as it was giving me losses. The second major economic decision is to select investment avenues whether to go for the investment in stocks or in bonds. I applied opportunity cost principle to get the benefits of investment of stock if investment opportunity in bond is foregone and vice versa. On this basis, I went to invest in stocks that was long term and for wealth creation purpose. So, these are some of the economic decisions taken up in the last 2 years.