Why Is Economics Important? Here Are Your Need-To-Know Facts

No one subject is better than another. However, numbers and figures play a large role in how societies function. Economics is the study of the facts and figures that affect government, households, families, businesses, and the overall state of the world’s resources. For those who have ever wondered, “why is economics important?” or been unsure of why economics is a smart subject to study, we will fill you in on all you need to know.

Understanding economics can change your life on a day-to-day level, as well as play a role in helping you understand the bigger picture of your local government and world affairs. We will break down the details: from defining economics to reasons why one may choose to major in the subject in college.

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What Is Economics?

Put in the most simple of terms, economics is the study of resources. It’s the methods and practices that help to quantify, optimize, and conserve resources on the level of: governments, businesses, households, societies, and individuals.

The broad nature of the subject means that it can be broken down into smaller pieces. For example, there are two main frameworks in which one can study economics, namely:

1. Macroeconomics

The big-picture study of what affects the economy as a whole. This can include imports and exports or the unemployment rate, for example.

2. Microeconomics

The study of resources on an individual and company level. Examples include: the study of supply and demand or how regulations may affect a business’ bottom line.

Why Does Economics Matter?

Economics affects everyone. It’s a misconception to think that only economists, financial professionals, and politicians should know about economics. As an individual in society, economics will play a role in your personal life, as well as your professional career.

Whatever happens in society and the world will come to touch your daily life in one way or another — whether it’s in the form of an unemployment rate or interest rates for banks. While you may not need to major in economics, it’s still important to have some kind of an understanding of the subject.

Economics play a role in all of the following major life experiences:

• How the government plans policies
• The state of the housing market and real estate investment opportunities
• The ability to make wise financial decisions
• The decision of whether or not to attend graduate school
• The cost and benefit of changing one’s career
• The development of public healthcare initiatives
• How to prevent crime
• Ways to reduce racism and inequality

The two main underlying principles in economics are: 1. resources have a limit and 2. society aims to use resources as efficiently as possible. This makes it clear as to why economics are important to every person in the world.

The Market For Economics Knowledge: Things You Learn

Some people are particularly inclined to know the ins and outs of economics. Depending on your future career goals or even just your passion for the subject, majoring in economics can be a wise decision.

As an undergraduate who chooses to major in the subject, you will benefit from the following:

• A wide array of job opportunities, including: accounting, banking, marketing, business, and consulting in the government, private sector, or public sector
• A rigorous foundation in data analysis with the ability to apply the knowledge in practical settings
• An understanding of microeconomics and macroeconomics
• Learning what is practical and applicable to real-life choices and decision-making
• The ability to solve problems
• Knowledge for how to make wise financial decisions
• Understanding of statistical and mathematical techniques
• Expertise in the use of technology and computers for data analysis

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The Basics Of Economics

Perhaps you don’t know much about the subject, but this has been an intriguing beginning. Let’s take a look at some of the basic principles of economics for a better understanding.

1. The Problem Of Scarcity

Everything you consume has a limit. On an individual level, you have to choose how much food you buy or how many new t-shirts you can afford. On a national level, governments have to decide how to allocate funds between defense or environmental protection. This is all because of scarcity.

Every resource — be it human production, skill, or natural resource — is capped. So scarcity creates a system of supply and demand that is altered by each individual’s constraints and choices that affect the whole.

2. The Division And Specialization Of Labor

Because each individual has a different skillset or desire to produce a different product, there is a natural division of labor. Coined by author Adam Smith in his work The Wealth of Nations, a division of labor is the idea that things are produced by different people. At the heart of economics, this truth has created jobs and businesses that divide tasks amongst its employees.

In a democratic society, it also gives you the right to study in and major in whatever you want to. To fulfill the career of your choice, you can specialize in education first. As our world leverages technology for improvement, schools like the University of the People are even able to provide tuition-free online education so that anyone can pursue their passions!

3. Division Of Labor Increases Production

Since 10 people creating a product will produce more in an hour than just one person creating the same product, it’s understandable why dividing labor and tasks can increase production. With division of labor comes specialization. On a small scale, this is the idea that some people major in Health Science while others major in Computer Science, depending on what they are better at.

Specialization and division of labor work together to produce competitive advantages in businesses and world economies.

4. Trade And Markets

Lastly, specialization results in trade and different markets for goods. This is because not everyone can make or do everything. So, societies use their goods to trade for other goods that they don’t produce.

Economics Is In Everything

Hopefully, just by understanding the basics of economics, you’ve come to realize how much of your personal life, college major, future career, and overall worldview is shaped by the matter.

Economics addresses and solves for:

1. How to deal with a shortage of materials
2. How to distribute resources in society
3. How much government should be involved in personal lives
4. What opportunity cost means
5. How to operate societies efficiently
6. How to plan for the future with forecasts
7. How to cope with economic crisis
8. How to evaluate the current state of societies
9. How people make their choices (behavioral economics)
10. Career opportunities and the job market

The Bottom Line

Every individual affects their society, and in turn, the world. From the small choices of what you buy to the larger choices of where you attend college, every decision you make will play a role in supply and demand, and as such, the overall economy. Economics is the study of resources and how to efficiently and effectively manage them so that people have what they need to live.

Those who choose to major in economics open the door to many job opportunities and careers in government, non-profits, and both public and private sectors. From banking to accounting, data analytics and more, a background in economics is highly beneficial.

An undergraduate in economics is also a great starting point to earn your Master’s in Business Administration because of the overlapping knowledge. For more on how you can obtain a tuition-free MBA online, check out the University of the People’s MBA program!