Daily Archives: April 13, 2018

What Does Economics Have To Do with Our Lives?

According to www.study.com, economics is the science of analysing the production, distribution, and consumption of goods and services. In other words, what choices people make and how and why they make them when making purchases. If we think about it, economics makes a lot of things work and move and today, we are going to talk about how economics is involved in our everyday lives.

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To start, Catherine Capozzi will tell us about economics in our everyday life. Let us read about it below.

Economics in Everyday Life

Many assume economics is a subject best left for government officials and students who love statistics. However, everyone incorporates tenets of this field into their lives on a daily basis: fathers shopping at the grocery store for dinner, teenagers deciding how to spend their summer and a truck driver calculating his route are just a few examples. Economists Charles Wheelan and Burton Malkiel explain in their book, “Naked Economics: Undressing the Dismal Science,” that despite the pervasiveness of economics in everyday life, too few people understand how this field applies to them.

Economics Defined

Economics is the study of how people, firms or institutions choose to allocate resources. Resources are not always dollars and cents: time, skill and land are all resources. People make economic decisions with the intention of maximizing their return. For example, a college student might allocate his time and substantial amounts of money to earn a degree. In return, that degree will ideally yield him numerous job opportunities and an increased income. Read more here.

One of the most common activities that involve economics is household budgeting. Economics has something to do with how we decide what to prioritize in buying, how much to spend for food, clothing, and other necessities. For additional information, Gregory Hamel will tell us about principles of economics that relate to your daily life.

Principles of Economics That Relate to Your Daily Life

When you find yourself in a scrum with a thousand other consumers trying to get the newest smart phone or holiday toy, you are a living example of the economic principle of supply and demand. Basic economic principles can influence everything from lines at the store to the likelihood of getting a raise at your job. Understanding the principles of economics can help you to better understand the world and make informed decisions.

Taxes

When buy something at the store that costs $100, you might end up paying $105 or more when you actually check out. Governments collect money from citizens by imposing fees or taxes on a variety of activities like buying goods, earning income and owning property. Taxes are the reason you take less home in your paycheck than your actual pay rate dictates: employers are required to send some of your pay to the government to pay for income taxes. The government uses tax money to pay for public goods like roads, sewer systems, public schools and national defense. Read more here.

Taxes really apply to a lot of thing involving money like buying goods, receiving salaries, and owning properties. This is one part of economics that we cannot really escape. Now, let us read more about how economics is applied in our everyday life through Tejvan Pettinger’s article found below.

Applying economics in everyday life

At the start of the academic year, I always feel a little pressure to justify the study of economics. Students come up asking things like, should they do economics or history? It’s hard to know what to say, but to get people excited about economics, it’s good to try and think how economics can be applied in everyday life. Some of this is just common sense, but economics can put a theory behind our everyday actions.

Buying goods which give the highest satisfaction for the price

This is common sense, but in economics, we give it the term of marginal utility theory. The idea is that a rational person will be evaluating how much utility (satisfaction) goods and services give him compared to the price. To maximise your overall welfare, you will consume a quantity of goods where total utility is maximised given your budget. For example, is it worth paying extra charges by airlines, such as paying for more leg-room? Or pay to get priority

boarding? Economics suggests we need to evaluate the marginal benefit of these services compared to the marginal cost. Read more here.

Given above are some important economics terms and how we could apply them in our daily lives. Some of these terms include opportunity cost, sunk cost, diminishing returns, and many others. Some situations where they could be applied are also mentioned above. If we see, economics really is involved in our lives especially when dealing with money. We need money for a lot of things that is why we need economics in life.