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IMPORTANCE OF ECONOMICS

Introduction:

Why Economics is Important in Human Life?

Economics subject is the oldest of arts and newest of sciences. It is mainly concernedwith how society employs scarce resources to produce goods and to satisfy futureconsumption. Modern day welfare states are expected to provide maximum welfareto the society by effectively allocating and distributing resources.

Wants are the starting point of subject economics. We cannot satisfy all our wantsbecause human wants are unlimited and the resources to satisfy these wants arelimited. We have many wants but not all are of equal importance. We prioritize theneeds and more urgent wants.

In this situation, an individual or the nation is expected to make choice amongunlimited wants to satisfy the first. Economics is also known as the science ofmaking choice. For example a nation has the following wants namely production ofguns, production of butter, construction of school, cinema houses, manufacturingbuses, cars etc.,

Due to scarcity in resources a nation cannot satisfy all the wants, Hence the Nation isexpected to make choice among the given wants. The most important and urgentwants among them would be satisfied initially. Naturally, the nations choice wouldbe 1) production of food (butter) 2) construction of school buildings,3) manufacturing of buses.

Making choice among the unlimited wants is the subject matter in study ofeconomics. To know about the nature and scope of economics let us discuss some ofthe important definitions of economics given by leading economists.

Adam Smiths definition on Economics (Wealth definition)

Adam smith also known as Father of Economics defined Economics in his famousbook published in 1776 namely, Wealth of Nations. He defines;

Economics is the science study about the nature and causes of wealth of Nations.Adam smith was criticized because the scope of economics is not studying aboutwealth alone above all it studies about welfare of men also.

Alfred Marshal, definition on Economics (welfare definition)Alfred Marshal in his book Principles of Economics defines economics as follows-Economics is the study of actions of mankind in the ordinary business of life.Marshall opines that economics one side study about wealth and the other andimportant side 6 study about the welfare of mankind. According to him economicsdeals more importantly about welfare of human than wealth.

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Lionel Robbins definition on Economics (scarcity definition)

Lionel Robbins defines the meaning of economics in his celebrated book namely, AnEssay on the Nature and significance of Economic science. According to Robbins,Economics is the science which studies human behavior as a relationship betweenends and scarce means which have alternative uses.From the above definition, we

can understand that the ends (wants) are unlimited and the resources are scarce withalternative uses. Economics studies how human beings relate ends and scarce meansto attain maximum satisfaction.

Samuelsons Definition (Modern Definition of Economics)Samuelsons definition is known as a modern definition of economics. According toSamuelson,

Economics is a social science concerned chiefly with the way societychooses to employ its resources, which have alternative uses, to produce goods and

services for present and future consumption. Prof. Samuelson and Robbins havemany common points such as ends, scarce means with alternative uses. However,Samuelson goes deeply a step further and says how a society uses limited resourcesfor producing goods and services for present and future production andconsumption.

The main objective of economics is to promote human welfare. All the economicactivities are performed to promote human welfare.

The theory of economics teaches us how to maximize human welfare with the given

level of income and resources.

It provides us important tools not only for the best utilization of available limitedresources but also the ways and means to augment these resources. The theory of8 economics helps us to understand how to produce the maximum output by theproper use of limited resources.

The main objective of consumers is maximum satisfaction. What is the mainobjective of producers?

The answer will be profit. The study of economics helps consumers to getmaximum satisfaction and producers to choose the level of output that givemaximum profit.

Money plays very important role in the life of human beings it is the mediumthrough which we buy and sell the goods and services. Apart from buying andselling of goods, money is used to make payment for a rented house, wages to thehired labourers and to repay the borrowed loans etc.

It is important to study economics because it gives us knowledge of how to use our

money when buying new items like cars, house, clothes goods etc In economics westudy the role of money in the life of human beings.

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In economics subject we study how the price of the commodity is determined in themarket, how it is changed according to the changing demand for the commodity andsupply of the commodity.

It also studies how rise or fall in price affects the human welfare or humansatisfaction of the consumers and profit of the producers.

Economics subject is important because it helps us to predict the production,consumption and distribution of goods and services based on human behaviour.

Economics subject provides us the knowledge and insight to understand thechallenges faced by the country such as unemployment, poverty, inequality ofincome and wealth, price rise, problem of rising population etc,

Many countries adopted the technique of planning to increase their economicsgrowth. The planners have to allocate the resources rationally to achieve balancedeconomic growth.

Economic being a science provides rational use of natural and human resourcesto achieve higher and balanced economic growth.

The knowledge of economics is indispensible to manage development activities of acountry. The politicians and the officials of a country need to have properknowledge of economics to plan for the future and to prepare budget, industrial andtrade policies.

To have good politics good economics is necessary.

To have better understanding of international affairs the knowledge of economics isessential. It is necessary to know and understand the socio economic issues ofdifferent countries, international trade etc.,

Economics is valuable not only as the subject of study but also enhances the valuessuch as analyzing arguments, empirical predictions, comprehension, rationality,numerical ability, interpretation techniques, interdependence and various otherskills which are necessary for human life.

Thus, economics is applicable in a wide range of fields such as decisions ofhouseholds, businesses and governments, finance, administration, law, production,consumption, distribution, trade, and banking. There is no field in life of humanbeings, which is not influenced by the Economics.

The problems faced by the modern states are basically economic in nature.

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Economists play an important role in solving the problems of states. When Germanyfaced problems from high price rise, shortage of goods ,and mass unemploymentduring Second World War,

Hence we may conclude that study of economics is very important for an individualor the nation to develop. One cannot rationally think, if he/she does not haveknowledge in economics.

THE END