WHY ECONOMICS IS IMPORTANT?
In the world of economics, a
central point that is often seen is how economic theory is important. The way
economists explain and predict markets is essential in our everyday lives. They
do this for us on many levels like what they are taught to think about money,
prices, scarcity, consumer behavior, inflation, etc. It is not just any subject
that impacts your life; it truly is critical! You can’t live without an
understanding of economics. Many business practices are based off of
mathematical equations and it helps with decision-making, price comparison, and
forecasting future events. So why does economics matter? Because people need
economists all around them in order to make decisions. When we lack economists,
businesses will be affected negatively and many communities around the globe
have seen this happen over the years. Let’s go over the reasons that economics
is important to know.
Economics is Essential when Looking
at Businesses!
You won’t believe the importance
of knowing economics when you see thousands upon thousands of dollars being
spent by these companies. This isn’t unusual either because most times,
entrepreneurs don’t even realize there is value that goes into a company like
this. There is so much money pouring into something when they aren’t sure what
the outcome will be. In fact, economists have made it easier than ever to track
spending and expenditures. There are many applications and programs available
that help businesses grow and become more successful. One example of such a
program was SNAP (Supplemental Nutrition Assistance Program) which helps
provide free lunches for anyone who would otherwise not receive one if they
were not eligible. By looking back on history and seeing how things used to be,
you might start thinking of ways to improve or save from these situations. As
easy as it seems, economists work hard making predictions of what can happen in
the future and how exactly those predictions can save a company money.
These predictions could even
result in better decisions for businesses and profits over time. Economic
changes can also impact supply chains and affect industries in general. Knowing
how various industries work and how other elements in them may affect
production and demand is crucial because it opens up potential new
opportunities for growth, as well. Also, knowing how to analyze data and
accurately forecast its influence on certain factors can increase profitability
because everyone wants their business to have success!
There are so many different areas
where economics can help businesses and how they function. With the right tools
and knowledge, economics has helped countless individuals create great products
and improved processes throughout the world. If you want to dive deeper into
the topic, check out my book “Think Big! Build Wealth for All” because I talk
about all the topics discussed inside the book and how they relate to economics
and financial matters in general. For this article though, let’s narrow it down
to the big picture and look at some specific aspects of economics, too.
When Economists Make Predictions
Before going any further,
economists usually make forecasts of the next year. What makes this possible is
the way economists use math to calculate probabilities and outcomes. These two
concepts tie together because one deals with taking scenarios and determining
how likely it is that something will happen. This type of analysis shows us how
likely something will be until it happens and not in advance. We then know how
likely it is that a given event will occur in the future and can act
accordingly when necessary. That said, many economists also conduct research
into what happened the last time a situation occurred. Researching previous
results from past scenarios allows economists to predict the likelihood of a
future scenario occurring again. A good example of this is unemployment rates,
especially the ones that exist within the United States. Another area
economists study is how the economy is performing and what can be done to
change what is happening for the worse.
The Impact Can Be Majorly
Positive Or Negatively Affected When Expecting Outcomes Based On Historical
Evidence
In my book, I discuss many
examples of how positive changes to the economy have been shown from historical
evidence. Unemployment rates show that as we look in many countries, it can get
very low before rising higher back up again. Similarly, you can also expect a
strong economy when you watch someone buying multiple luxury items. People tend
to spend more on luxuries, and they are willing to pay more money for them! At
the same time, I believe this is due to the desire to earn more money. When we
buy luxury items, consumers want more than just what they are spending on them.
They want something brand new and unique as well. Therefore, luxury goods are
less common when compared to cheaper items. Spending a little on a few pairs of
shoes wouldn’t be bad enough unless you’re purchasing something new! To sum up
the discussion above, many of these events could only happen once in a lifetime
or as a rare occurrence. Instead, we keep hoping for them to happen every
single day. However, they never do, either. Once money has gone from $100 to
$1,000, it’s no longer needed. But there is always hope and as long as you
watch and wait for them to occur and make you happy, there is little reason to
worry. This brings us back into the question and why economists are extremely
valuable during this time. If you want to learn more about the role economists
play in everything you do, click here to check out my ebook Free Essentials
Guide To Personal Finance.