Question

What is economics and why is it important?

Answer 1

Economics can simply be seen as the study of how human beings take a decision when they face the situation of scarcity. These decisions can vary from an individual decision, family decision, business decision or the societal decision. If we look around us we will find that the fact of the life is that we have the scarcity of almost everything.

Scarcity mainly depicts that human demands are more than the goods and services and resources what is present in the external world. In order to produce goods, it is important to have the resources such as land, labor, tools and raw materials but the supply of these is limited.

Thus we can state that economics is mainly related to the optimal distribution of societal resources. This mainly involves:-

Having a better understanding of the operation of markets and macroeconomy

Evaluating the statistics of the nature and state of the economy and determining their importance

Having better knowledge of various policy alternatives and estimating their outcomes.

Importance of economics:- The importance of economics can be understood by the fact that economics helps us in coming to the following decisions:-

• Helps in dealing the shortage of raw materials
• Explains the best or optimal distribution of scarce resources
• Determining the intervention of government in the economy
• It helps in finding out the opportunity cost fo various decisions
• T explains what is happening in the economy and understating the factors behind the poverty, unemployment and low economic development
• Economics helps in forecasting the future demand and supply and various factors which can affect these.
• Understand why people behave in a certain manner.

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