WHAT IS ECONOMICS? WHAT ARE THE IMPORTANCE OF ECONOMICS?

Economics can be defined as the study of how individuals, government and other economic agents make decisions in the face of scarcity.

Scarcity is the idea that there are limited resources to satisfy unlimited wants. Hence, it is often said that human wants are insatiable.

Different economists have different definitions of economics. Here are a few of them.

Adams Smith defined economics as "an inquiry into the nature and causes of the wealth of nations"

According to Richard Lipsey, "Economics is the study of the use of scarce resources to satisfy unlimited human wants."

Alfred Marshall defined economics as "the study of mankind in the ordinary business of life".

In J.B say view, " Economics is the science of production, distribution, and consumption of wealth".

Mark Blaug (2007) sees economics as the "branch of social science that deals with the production and distribution and consumption of goods and services and their management.

To Paul Samuelson, "Economics is the "study of how societies use scarce resources to produce valuable commodities and distribute them among different people".

However, the most widely accepted definition of economics was given by Lionel Robinson in 1932 in his book ‘An Essay on the Nature and Significance of Economic Science".

According to him, "economics is a science that studies human behaviour as a relationship between ends and scarce means which have alternative uses".

Lionel Robinson's definition is generally accepted because it covers crucial concepts such as ends and scarce means, all of which are critical to comprehending economics.

Importance of studying economics

1. Understand the nature of economic life: Economics enables us to understand the complexity of economic life.

Through the study of economics, we get to know what affect the purchasing power of individuals, how tax and interest rate affect our spending.

2. Provides basic skills:  It equips us with the fundamental skill of analyzing economic problems, allowing us to deal with them when they arise.

3. Maximizing utility: It teaches consumers how to make rational use of scarce resources to satisfy unlimited wants so that they maximize utility.

4. Helps us allocate scarce resources: Economics also provides a rational guide to the business firm and the government in the allocation of scarce resources in such a way that increases efficiency.

5. Helps us understand how consumers behave: Economics teaches consumers how to make rational choices.

We can learn how consumers behave by studying economics, which is crucial for a firm to prosper.

6. Can help the government achieve its objectives: Economics gives the government the tools it needs to achieve its macroeconomic policy objectives.

The government can determine which policies to implement to achieve its macroeconomic objectives by studying economics.

If economic lessons are successfully implemented, they can assist the government in promoting growth and development, and therefore improving the quality of life for its citizens

7. Helps in the understanding of government economic policies: Economics can be a useful tool in understanding economics.

Through the study of economics, We can learn about the government's monetary and fiscal policies, as well as what the government is trying to achieve by employing any of these policies.

For example, the government may take expansionary monetary policy to cure recession.

8. Useful for planning: The knowledge of economics helps planners to plan for socio-economic development.

Furthermore, understanding economics aids government expenditure planning (budget ).

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