Question

Describe how economics is important to us. 250 words

Answer 1

Economics is of immense importance to us individually as well as a society. Economics is about allocating scarce resources among various competing and unlimited wants of people and the society. The society needs resources for its survival and growth. Land, water, minerals, labor hours, plants, machinery, production capacity, etc. are examples of resources. Resources are in limited supply. On the other hand, people have unlimited wants. We all want to consume unlimited among of goods and services. However, given the unlimited nature of wants and limited nature of resources, we need a mechanism through which we can allocate the limited resources among the unlimited wants so that we get maximum utility or satisfaction. Economics help us doing the same. Economics studies how resources can be allocated most effectively to get the maximum satisfaction out of the resources. By doing so, economics help us solving three central economic problems faced by the society:

1) What to produce?

2) How to produce?

3) For whom to produce?

Therefore, economics is indispensable for the society. In the absence of economics, resources would be allocated haphazardly and individuals and the society would fail to optimize their utility. In addition, economics provides us a number of principals and rules which help us make better decisions in all aspects of life. For example, economics helps us think in the margin. We can evaluate an alternative with the help of comparing the marginal benefits with the marginal cost. Economics tells us about opportunity cost, which is different from the direct cost of an alternative. Opportunity cost helps us understand the real cost of a decision or an alternative.