Why Study Economics?
Meet the Author
PROF. RADHIKA LOBOSchool of Business Studies,
Prof. Radhika Lobo is an award-winning researcher and academician with over 3 decades of experience. She holds a Ph.D and an M.Phil in Economics and has held leadership positions in academic administration. Prof. Lobo was deputed as an Exchange Faculty at the University of West Georgia and Clayton Business School, in the US. She has also been Visiting Faculty at several B-Schools including, NMIMS, Mumbai; Asia Graduate School of Business, Hyderabad and BIMTECH, Noida.
As a guest speaker at National and International Universities, she has spoken on topics related to the Indian Economy, International Economics and the Financial Crisis.
Prof. Lobo has published a book titled Southeast Asian Crisis: An Economic Analysis, and several research papers across reputed journals.
WHY STUDY ECONOMICS?
The study of economics helps individuals, firms and governments to decide how to allocate the resources available to them. A student has a constant struggle between using the pocket money to either buy an e-book needed for a project or to spend it on watching a film in the theatre with friends. Firms and businesses need to decide whether to use the funds they have for market expansion or expand their product line. Likewise, governments are faced with the dilemma whether they must use the tax revenue for strengthening the military or produce goods for civilian consumption. The final decision made between these choices and several others available, depends on human behavior.
Economics has application in day-to-day life and hence imparts the domain knowledge needed to pursue a career in a related area. So let's try and understand what the subject area of economics covers and what its applications area. Considering that the ongoing pandemic has affected every individual, business and government, it may be relevant to look at the subject matter of economics and its application given this situation.
ECONOMICS HAS APPLICATION IN DAY-TO DAY LIFE AND HENCE IMPARTS THE DOMAIN KNOWLEDGE NEEDED TO PURSUE A CAREER IN A RELATED AREA.
ECONOMICS AS A KNOWLEDGE DOMAIN
The subject area of economics is generally categorized into microeconomics and macroeconomics. Microeconomics brings out the reasons why a product or service has high demand; the factors that affect its supply; how the interactions between these determine the price, and also how the markets in which these operations are conducted have a bearing on the same.
Suppose that you need to write an examination in another town and that the same is unavailable online, you will demand a flight ticket. Fewer flights may be available given the pandemic and hence the price of the ticket may be much higher than under normal circumstances. Further, if, the section that you are flying is serviced by only two or three airlines, that is, you are faced with an oligopolistic market; it will be difficult for you to find cheaper options. In this situation, if you are on the other side of the table, say, the manager of the airline firm, you will do well to offer tickets at the higher market price, but provide additional services like hygienically packed food, quick and online contactless check-in services, a discount for those who do not have a check in baggage etc. In short, your firm can compete on the non price aspects and secure more business for your itself!
What are the aggregate production, consumption, savings and investment of the economy? These are aspects that macroeconomics deals with. The pandemic has caused the Gross Domestic Product to plummet and has caused a slowdown of the world economy. Economists in the given scenario are offering solutions to boost the economy through monetary and fiscal policy measures. For instance in the UK, fiscal measures such as tax deferrals and tax reductions have been undertaken so that businesses can have liquidity in the current time period and use it to reinvest into their businesses. To ensure that unemployment is minimal, measures like Job Retention Scheme, State Compensation Schemes, training etc have been introduced. In India, the monetary authorities lowered the interest rate as an effort to increase investment. The finance minister has allocated Rs 2,83,846 lakh crore for health care in the budget of 2021. Monetary Economics and Public Economics are areas that provide theoretical and practical solutions to real world problems.