what is the study of economics essay

1.1 What Is Economics, and Why Is It Important?

Learning objectives.

By the end of this section, you will be able to:

Discuss the importance of studying economics
Explain the relationship between production and division of labor
Evaluate the significance of scarcity

Economics is the study of how humans make decisions in the face of scarcity. These can be individual decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone, rich or poor, has just 24 expendable hours in the day to earn income to acquire goods and services, for leisure time, or for sleep. At any point in time, there is only a finite amount of resources available.

Think about it this way: In 2015 the labor force in the United States contained over 158 million workers, according to the U.S. Bureau of Labor Statistics. The total land area was 3,794,101 square miles. While these are certainly large numbers, they are not infinite. Because these resources are limited, so are the numbers of goods and services we produce with them. Combine this with the fact that human wants seem to be virtually infinite, and you can see why scarcity is a problem.

Introduction to FRED

Data is very important in economics because it describes and measures the issues and problems that economics seek to understand. A variety of government agencies publish economic and social data. For this course, we will generally use data from the St. Louis Federal Reserve Bank's FRED database. FRED is very user friendly. It allows you to display data in tables or charts, and you can easily download it into spreadsheet form if you want to use the data for other purposes. The FRED website includes data on nearly 400,000 domestic and international variables over time, in the following broad categories:

Money, Banking & Finance
Population, Employment, & Labor Markets (including Income Distribution)
National Accounts (Gross Domestic Product & its components), Flow of Funds, and International Accounts
Production & Business Activity (including Business Cycles)
Prices & Inflation (including the Consumer Price Index, the Producer Price Index, and the Employment Cost Index)
International Data from other nations
U.S. Regional Data
Academic Data (including Penn World Tables & NBER Macrohistory database)

For more information about how to use FRED, see the variety of videos on YouTube starting with this introduction.

If you still do not believe that scarcity is a problem, consider the following: Does everyone require food to eat? Does everyone need a decent place to live? Does everyone have access to healthcare? In every country in the world, there are people who are hungry, homeless (for example, those who call park benches their beds, as Figure 1.2 shows), and in need of healthcare, just to focus on a few critical goods and services. Why is this the case? It is because of scarcity. Let’s delve into the concept of scarcity a little deeper, because it is crucial to understanding economics.

The Problem of Scarcity

Think about all the things you consume: food, shelter, clothing, transportation, healthcare, and entertainment. How do you acquire those items? You do not produce them yourself. You buy them. How do you afford the things you buy? You work for pay. If you do not, someone else does on your behalf. Yet most of us never have enough income to buy all the things we want. This is because of scarcity. So how do we solve it?

Visit this website to read about how the United States is dealing with scarcity in resources.

Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a fancy vacation. Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protecting the environment. In most cases, there just isn’t enough money in the budget to do everything. How do we use our limited resources the best way possible, that is, to obtain the most goods and services we can? There are a couple of options. First, we could each produce everything we each consume. Alternatively, we could each produce some of what we want to consume, and “trade” for the rest of what we want. Let’s explore these options. Why do we not each just produce all of the things we consume? Think back to pioneer days, when individuals knew how to do so much more than we do today, from building their homes, to growing their crops, to hunting for food, to repairing their equipment. Most of us do not know how to do all—or any—of those things, but it is not because we could not learn. Rather, we do not have to. The reason why is something called the division and specialization of labor , a production innovation first put forth by Adam Smith ( Figure 1.3 ) in his book, The Wealth of Nations .

The Division of and Specialization of Labor

The formal study of economics began when Adam Smith (1723–1790) published his famous book The Wealth of Nations in 1776. Many authors had written on economics in the centuries before Smith, but he was the first to address the subject in a comprehensive way. In the first chapter, Smith introduces the concept of division of labor , which means that the way one produces a good or service is divided into a number of tasks that different workers perform, instead of all the tasks being done by the same person.

To illustrate division of labor, Smith counted how many tasks went into making a pin: drawing out a piece of wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and packaging pins for sale, to name just a few. Smith counted 18 distinct tasks that different people performed—all for a pin, believe it or not!

Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located. A complex business like a large manufacturing factory, such as the shoe factory ( Figure 1.4 ), or a hospital can have hundreds of job classifications.

Why the Division of Labor Increases Production

When we divide and subdivide the tasks involved with producing a good or service, workers and businesses can produce a greater quantity of output. In his observations of pin factories, Smith noticed that one worker alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to complete two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Smith offered three reasons.

First, specialization in a particular small job allows workers to focus on the parts of the production process where they have an advantage. (In later chapters, we will develop this idea by discussing comparative advantage .) People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, geography affects specialization. For example, it is easier to be a wheat farmer in North Dakota than in Florida, but easier to run a tourist hotel in Florida than in North Dakota. If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will be more effective than if they produce a combination of things, some of which they are good at and some of which they are not.

Second, workers who specialize in certain tasks often learn to produce more quickly and with higher quality. This pattern holds true for many workers, including assembly line laborers who build cars, stylists who cut hair, and doctors who perform heart surgery. In fact, specialized workers often know their jobs well enough to suggest innovative ways to do their work faster and better.

A similar pattern often operates within businesses. In many cases, a business that focuses on one or a few products (sometimes called its “ core competency ”) is more successful than firms that try to make a wide range of products.

Third, specialization allows businesses to take advantage of economies of scale , which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines. For example, if a factory produces only 100 cars per year, each car will be quite expensive to make on average. However, if a factory produces 50,000 cars each year, then it can set up an assembly line with huge machines and workers performing specialized tasks, and the average cost of production per car will be lower. The ultimate result of workers who can focus on their preferences and talents, learn to do their specialized jobs better, and work in larger organizations is that society as a whole can produce and consume far more than if each person tried to produce all of their own goods and services. The division and specialization of labor has been a force against the problem of scarcity.

Trade and Markets

Specialization only makes sense, though, if workers can use the pay they receive for doing their jobs to purchase the other goods and services that they need. In short, specialization requires trade.

You do not have to know anything about electronics or sound systems to play music—you just buy an iPod or MP3 player, download the music, and listen. You do not have to know anything about artificial fibers or the construction of sewing machines if you need a jacket—you just buy the jacket and wear it. You do not need to know anything about internal combustion engines to operate a car—you just get in and drive. Instead of trying to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to consume, the market allows you to learn a specialized set of skills and then use the pay you receive to buy the goods and services you need or want. This is how our modern society has evolved into a strong economy.

Why Study Economics?

Now that you have an overview on what economics studies, let’s quickly discuss why you are right to study it. Economics is not primarily a collection of facts to memorize, although there are plenty of important concepts to learn. Instead, think of economics as a collection of questions to answer or puzzles to work. Most importantly, economics provides the tools to solve those puzzles.

Consider the complex and critical issue of education barriers on national and regional levels, which affect millions of people and result in widespread poverty and inequality. Governments, aid organizations, and wealthy individuals spend billions of dollars each year trying to address these issues. Nations announce the revitalization of their education programs; tech companies donate devices and infrastructure, and celebrities and charities build schools and sponsor students. Yet the problems remain, sometimes almost as pronounced as they were before the intervention. Why is that the case? In 2019, three economists—Esther Duflo, Abhijit Banerjee, and Michael Kremer—were awarded the Nobel Prize for their work to answer those questions. They worked diligently to break the widespread problems into smaller pieces, and experimented with small interventions to test success. The award citation credited their work with giving the world better tools and information to address poverty and improve education. Esther Duflo, who is the youngest person and second woman to win the Nobel Prize in Economics, said, "We believed that like the war on cancer, the war on poverty was not going to be won in one major battle, but in a series of small triumphs. . . . This work and the culture of learning that it fostered in governments has led to real improvement in the lives of hundreds of millions of poor people.”

As you can see, economics affects far more than business. For example:

Virtually every major problem facing the world today, from global warming, to world poverty, to the conflicts in Syria, Afghanistan, and Somalia, has an economic dimension. If you are going to be part of solving those problems, you need to be able to understand them. Economics is crucial.
It is hard to overstate the importance of economics to good citizenship. You need to be able to vote intelligently on budgets, regulations, and laws in general. When the U.S. government came close to a standstill at the end of 2012 due to the “fiscal cliff,” what were the issues? Did you know?
A basic understanding of economics makes you a well-rounded thinker. When you read articles about economic issues, you will understand and be able to evaluate the writer’s argument. When you hear classmates, co-workers, or political candidates talking about economics, you will be able to distinguish between common sense and nonsense. You will find new ways of thinking about current events and about personal and business decisions, as well as current events and politics.

The study of economics does not dictate the answers, but it can illuminate the different choices.

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What Is Economics?

Introduction

Economics is about making choices. We make all kinds of choices every day. How much should I spend on gas? What’s the best route to work? Where should we go for dinner? Which job or career should I go for? What are the pros and cons of finishing college versus taking a job or inventing the next, best Internet startup? Which roommate should take care of washing the dishes? Can I get that dog as a pet? Should I get married, have children, and if so, when? Which politician should I vote for when they all claim they can improve the economy or make my life better? What is “the economy,” anyway? What if my personal or religious principles conflict with what people tell me is in my best economic interest?

Many people hear the word “economics” and think it is all about money. Economics is not just about money. It is about weighing different choices or alternatives. Some of those important choices involve money, but most do not. Most of your daily, monthly, or life choices have nothing to do with money, yet they are still the subject of economics. For example, your decisions about whether it should be you or your roommate who should be the one to clean up or do the dishes, whether you should spend an hour a week volunteering for a worthy charity or send them a little money via your cell phone, or whether you should take a job so you can help support your siblings or parents or save for your future are all economic decisions. In many cases, money is merely a helpful tool or just a veil, standing in for a partial way to evaluate some of the goals you really care about and how you make choices about those goals.

You might also think economics is all about “economizing” or being efficient–not making foolish or wasteful choices about how you spend or budget your time and money. That is certainly part of what economics is about. However, that’s just the tip of the iceberg. We all know that we can save money or time by being more efficient in our planning. A trip to the supermarket can be coordinated with a trip to take your child to school or to deposit a check at the bank across the street to save on gas. But we sometimes don’t choose the most efficient options. Why not? Economics is also about plumbing the depths of why we sometimes do and sometimes don’t make what seem like the most economizing or economical choices.

Is economics a science (like physics), or is it a social science, or even an art? What is the difference, and what do we know about what we can’t or don’t know for now? Can economic problems be solved by better government, more experts, bigger computers, more engineering, better education, less government, more dispersed knowledge, more markets? How can we make informed choices?

You’ve probably heard that economists disagree about a lot of things. Actually, what economists disagree about is politics or public policy, not economics. Exploring the interface between politics and economics is part of the fun.

On this page are some famous, standard definitions about what economics is all about.

Definitions and Basics

Economics is the study of given ends and scarce means. Lionel Robbins , biography, from the Concise Encyclopedia of Economics :

Robbins’ most famous book was An Essay on the Nature and Significance of Economic Science , one of the best-written prose pieces in economics. That book contains three main thoughts. First is Robbins’ famous all-encompassing definition of economics that is still used to define the subject today: “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.”…

What is “political economy”? Chapter I, Principles of Economics , by Alfred Marshall.

Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man. For man’s character has been moulded by his every-day work, and the material resources which he thereby procures, more than by any other influence unless it be that of his religious ideals; and the two great forming agencies of the world’s history have been the religious and the economic. Here and there the ardour of the military or the artistic spirit has been for a while predominant: but religious and economic influences have nowhere been displaced from the front rank even for a time; and they have nearly always been more important than all others put together. Religious motives are more intense than economic, but their direct action seldom extends over so large a part of life. For the business by which a person earns his livelihood generally fills his thoughts during by far the greater part of those hours in which his mind is at its best; during them his character is being formed by the way in which he uses his faculties in his work, by the thoughts and the feelings which it suggests, and by his relations to his associates in work, his employers or his employees.

Isn’t economics nicknamed the “dismal science” because it is all about running out of resources and the inevitable decline of life as we know it? Who coined the phrase “the dismal science”? The Secret History of the Dismal Science: Economics, Religion, and Race in the 19th Century , by David M. Levy and Sandra J. Peart. Econlib, January 22, 2001.

Everyone knows that economics is the dismal science. And almost everyone knows that it was given this description by Thomas Carlyle, who was inspired to coin the phrase by T. R. Malthus’s gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship. While this story is well-known, it is also wrong, so wrong that it is hard to imagine a story that is farther from the truth. At the most trivial level, Carlyle’s target was not Malthus, but economists such as John Stuart Mill, who argued that it was institutions, not race, that explained why some nations were rich and others poor….

Economics on One Foot , a LearnLiberty video.

Prof. Art Carden, in memory of Ayn Rand’s philosophy on one foot, presents economics on one foot.

In the News and Examples

Diane Coyle on the Soulful Science , EconTalk podcast.

Diane Coyle talks with host Russ Roberts about the ideas in her new book, The Soulful Science: What Economists Really Do and Why it Matters. The discussions starts with the issue of growth–measurement issues and what economists have learned and have yet to learn about why some nations grow faster than others and some don’t grow at all. Subsequent topics include happiness research, the politics and economics of inequality, the role of math in economics, and policy areas where economics has made the greatest contribution….

Isn’t economics all about supply and demand? Richard McKenzie on Prices , EconTalk podcast. June 23, 2008.

Richard McKenzie of the University California, Irvine and the author of Why Popcorn Costs So Much at the Movies and Other Pricing Puzzles, talks with EconTalk host Russ Roberts about a wide range of pricing puzzles. They discuss why Southern California experiences frequent water crises, why price falls after Christmas, why popcorn seems so expensive at the movies, and the economics of price discrimination….

Isn’t economics all about Adam Smith and the invisible hand? Adam Smith: The Invisible Hand , a LearnLiberty video.

Prof. James Otteson, using the ideas of Adam Smith, explains how the division of labor is a necessary and crucial element of wealthy nations.

Don’t all economists disagree? Henderson on Disagreeable Economists . EconTalk podcast, July 30, 2007.

David Henderson, editor of the Concise Encyclopedia of Economics and a research fellow at Stanford’s Hoover Institution, talks with EconTalk host Russ Roberts about when and why economists disagree. Harry Truman longed for a one-armed economist, one willing to go out on a limb and take an unequivocal position without adding “on the other hand…”. Truman’s view is often reflected in the public’s view that economic knowledge is inherently ambiguous and that economists never agree on anything. Henderson claims that this view is wrong–that there is substantial agreement among economists on many scientific questions–while Roberts wonders whether this consensus is getting a bit frayed around the edges. The conversation highlights the challenges the everyday person faces in trying to know when and what to believe when economists take policy positions based on research. Is it biased or science?

Humorous essay. Zero-sum games like income redistribution are more exciting than economic fundamentals like the gains from trade. Why is Economics So Boring? , by Donald Cox. Econlib, November 7, 2005.

Stan: Ollie, you know the worst part about being an economist? You meet someone at a cocktail party, you tell them you teach economics. Ollie: …and they say “Oh, yeah, I took that in college. I hated it. It was sooo boring!”… … getting the credit for Equation 14 is a zero sum game. And we care about zero sum games. There’s drama. There’s tension. There’s a loser for every winner. It makes for good TV, doesn’t it? But it’s not very common in reality. What common in reality is both sides are better off. The buyer and the seller of the car in the ad. That’s reality. No violence, no theft. Boring balloons. Boring happy people. Economics is boring….

Is economics just a fuss about language? The Economy: Metaphors We (Shouldn’t) Live By , by Max Borders.

“Argument is war.” That’s what cognitive linguists George Lakoff and Mark Johnson write in the opening chapter of their influential 1980 Metaphors We Live By. In that seminal book, Lakoff and Johnson offer a number of powerful lessons about figurative language: Metaphor is more than mere literary window dressing; metaphor is a fundamental aspect of human thought and language; and metaphors help us navigate the real world with a degree of efficiency that literal language can’t offer. It can even–for better or worse–change our perceptions of things….

A Little History: Primary Sources and References

Economics is sometimes called catallarchy or catallactics, meaning the science of exchanges. Where did this term first come from? Lecture I, Introductory Lectures on Political Economy , by Richard Whately.

It is with a view to put you on your guard against prejudices thus created, (and you will meet probably with many instances of persons influenced by them,) that I have stated my objections to the name of Political-Economy. It is now, I conceive, too late to think of changing it. A. Smith, indeed, has designated his work a treatise on the “Wealth of Nations;” but this supplies a name only for the subject-matter, not for the science itself. The name I should have preferred as the most descriptive, and on the whole least objectionable, is that of CATALLACTICS, or the “Science of Exchanges.”…

Advanced Resources

Is Economics All About Scarcity? , by Arnold Kling. Blog discussion on EconLog, January 17, 2007.

… I am two-handed on this issue. On the one hand, just because food, say, has become more abundant does not mean that we can ignore scarcity. At any moment in time, for a given state of know-how, the conventional definition of economics as dealing with the allocation of scarce resources among competing ends applies. On the other hand, some of the most interesting economic observations concern relative abundance. Look at our standard of living compared to 100 years ago. Look at South Korea compared with North Korea. Robert Lucas famously said that “The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them it is hard to think of anything else.”…

1.1 What Is Economics, and Why Is It Important?

Learning objectives.

By the end of this section, you will be able to:

Discuss the importance of studying economics
Explain the relationship between production and division of labor
Evaluate the significance of scarcity

Economics is the study of how humans make decisions in the face of scarcity. These can be individual decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone, rich or poor, has just 24 hours in the day to try to acquire the goods they want. At any point in time, there is only a finite amount of resources available.

Think about it this way: the total land area of the main Hawaiian islands is only 10,931 square miles. Because land and other natural resources are limited, so are the numbers of goods and services we can produce with them. Combine this with the fact that human wants seem to be virtually infinite, and you can see why scarcity is a problem.

If you still do not believe that scarcity is a problem, consider the following: Does everyone need food to eat? Does everyone need a decent place to live? Does everyone have access to healthcare? In Hawaiʻi there are people who are hungry, homeless, and in need of healthcare, just to focus on a few critical goods and services. Why is this the case? It is because of scarcity. Let’s delve into the concept of scarcity a little deeper, because it is crucial to understanding economics.

What is a good and what is a service?

Goods have a physical tangible presence, for example, a pizza or a scissors. Services have no physical tangible presence but have economic value (people are willing to pay to get this service). Examples of services include the delivery of a pizza or getting your hair cut.

Only around 20% of workers in the US work at jobs where they produce goods. The percentage is even smaller in Hawaiʻi: only 4% of workers in Hawaiʻi produce goods! What are the main services produced in Hawaiʻi and what are the main goods?

The Problem of Scarcity

Think about all the things you consume: food, shelter, clothing, transportation, healthcare, and entertainment. How do you acquire those items? You do not produce them yourself. You buy them. How do you afford the things you buy? You work for pay. Or if you do not, someone else does on your behalf. Yet most of us never have enough to buy all the things we want. This is because of scarcity. So how do we solve it?

Visit this website to read about how the United States is dealing with scarcity in resources.

Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a fancy vacation. Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protecting the environment. In most cases, there just isn’t enough money in the budget to do everything. So why do we not each just produce all of the things we consume? The simple answer is most of us do not know how, but that is not the main reason. (When you study economics, you will discover that the obvious choice is not always the right answer—or at least the complete answer. Studying economics teaches you to think in a different of way.) Think back to pioneer days, when individuals knew how to do so much more than we do today, from building their homes, to growing their crops, to hunting for food, to repairing their equipment. Most of us do not know how to do all—or any—of those things. It is not because we could not learn. Rather, we do not have to. The reason why is something called the division and specialization of labor , a production innovation first put forth by Adam Smith in his book, The Wealth of Nations .

The Division of and Specialization of Labor

The formal study of economics began when Adam Smith (1723–1790) published his famous book The Wealth of Nations in 1776. Many authors had written on economics in the centuries before Smith, but he was the first to address the subject in a comprehensive way. In the first chapter, Smith introduces the division of labor , which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person.

To illustrate the division of labor, Smith counted how many tasks went into making a pin: drawing out a piece of wire, cutting it to the right length, straightening it, putting a head on one end and a point on the other, and packaging pins for sale, to name just a few. Smith counted 18 distinct tasks that were often done by different people—all for a pin, believe it or not!

Modern businesses divide tasks as well. Even a relatively simple business like a restaurant divides up the task of serving meals into a range of jobs like top chef, sous chefs, less-skilled kitchen help, servers to wait on the tables, a greeter at the door, janitors to clean up, and a business manager to handle paychecks and bills—not to mention the economic connections a restaurant has with suppliers of food, furniture, kitchen equipment, and the building where it is located (check out the video below). A complex business like a large manufacturing factory or a hospital can have hundreds of job classifications.

The Division of Labor at work at Marukame Udon in Waikiki:

Why the Division of Labor Increases Production

When the tasks involved with producing a good or service are divided and subdivided, workers and businesses can produce a greater quantity of output. In his observations of pin factories, Smith observed that one worker alone might make 20 pins in a day, but that a small business of 10 workers (some of whom would need to do two or three of the 18 tasks involved with pin-making), could make 48,000 pins in a day. How can a group of workers, each specializing in certain tasks, produce so much more than the same number of workers who try to produce the entire good or service by themselves? Smith offered three reasons.

First, specialization in a particular small job allows workers to focus on the parts of the production process where they have an advantage. (In later chapters, we will develop this idea by discussing comparative advantage .) People have different skills, talents, and interests, so they will be better at some jobs than at others. The particular advantages may be based on educational choices, which are in turn shaped by interests and talents. Only those with medical degrees qualify to become doctors, for instance. For some goods, specialization will be affected by geography—it is easier to be a wheat farmer in North Dakota than in Florida, but easier to run a tourist hotel in Florida than in North Dakota. If you live in or near a big city, it is easier to attract enough customers to operate a successful dry cleaning business or movie theater than if you live in a sparsely populated rural area. Whatever the reason, if people specialize in the production of what they do best, they will be more productive than if they produce a combination of things, some of which they are good at and some of which they are not.

Trade and Markets

Specialization only makes sense, though, if workers can use the pay they receive for doing their jobs to purchase the other goods and services that they need. In short, specialization requires trade.

You do not have to know anything about electronics or sound systems to play music—you just buy an iPod or MP3 player, download the music and listen. You do not have to know anything about artificial fibers or the construction of sewing machines if you need a jacket—you just buy the jacket and wear it. You do not need to know anything about internal combustion engines to operate a car—you just get in and drive. Instead of trying to acquire all the knowledge and skills involved in producing all of the goods and services that you wish to consume, the market allows you to learn a specialized set of skills and then use the pay you receive to buy the goods and services you need or want. This is how our modern society has evolved into a strong economy.

Why Study Economics?

Now that we have gotten an overview on what economics studies, let’s quickly discuss why you are right to study it. Economics is not primarily a collection of facts to be memorized, though there are plenty of important concepts to be learned. Instead, economics is better thought of as a collection of questions to be answered or puzzles to be worked out. Most important, economics provides the tools to work out those puzzles. If you have yet to be been bitten by the economics “bug,” there are other reasons why you should study economics.

Virtually every major problem facing the world today, from global warming, to world poverty, to the conflicts in Syria, Afghanistan, and Somalia, has an economic dimension. If you are going to be part of solving those problems, you need to be able to understand them. Economics is crucial.
It is hard to overstate the importance of economics to good citizenship. You need to be able to vote intelligently on budgets, regulations, and laws in general. When the U.S. government came close to a standstill at the end of 2012 due to the “fiscal cliff,” what were the issues involved? Did you know?
A basic understanding of economics makes you a well-rounded thinker. When you read articles about economic issues, you will understand and be able to evaluate the writer’s argument. When you hear classmates, co-workers, or political candidates talking about economics, you will be able to distinguish between common sense and nonsense. You will find new ways of thinking about current events and about personal and business decisions, as well as current events and politics.

The study of economics does not dictate the answers, but it can illuminate the different choices.

Key Concepts and Summary

Economics seeks to solve the problem of scarcity, which is when human wants for goods and services exceed the available supply. A modern economy displays a division of labor, in which people earn income by specializing in what they produce and then use that income to purchase the products they need or want. The division of labor allows individuals and firms to specialize and to produce more for several reasons: a) It allows the agents to focus on areas of advantage due to natural factors and skill levels; b) It encourages the agents to learn and invent; c) It allows agents to take advantage of economies of scale. Division and specialization of labor only work when individuals can purchase what they do not produce in markets. Learning about economics helps you understand the major problems facing the world today, prepares you to be a good citizen, and helps you become a well-rounded thinker.

Self-Check Questions

What is scarcity? Can you think of two causes of scarcity?
Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce it and takes a month. If the town has a total of 100 people, what is the maximum amount of ham the residents can consume in a month?
A consultant works for $200 per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?
A computer systems engineer could paint his house, but it makes more sense for him to hire a painter to do it. Explain why.

Review Questions

Give the three reasons that explain why the division of labor increases an economy’s level of production.
What are three reasons to study economics?

Critical Thinking Questions

Suppose you have a team of two workers: one is a baker and one is a chef. Explain why the kitchen can produce more meals in a given period of time if each worker specializes in what they do best than if each worker tries to do everything from appetizer to dessert.
Why would division of labor without trade not work?
Can you think of any examples of free goods, that is, goods or services that are not scarce?

Bureau of Labor Statistics, U.S. Department of Labor. 2015. “The Employment Situation—February 2015.” Accessed March 27, 2015. http://www.bls.gov/news.release/pdf/empsit.pdf.

Williamson, Lisa. “US Labor Market in 2012.” Bureau of Labor Statistics . Accessed December 1, 2013. http://www.bls.gov/opub/mlr/2013/03/art1full.pdf.

Answers for Self-Check Questions

Scarcity means human wants for goods and services exceed the available supply. Supply is limited because resources are limited. Demand, however, is virtually unlimited. Whatever the supply, it seems human nature to want more.
100 people / 10 people per ham = a maximum of 10 hams per month if all residents produce ham. Since consumption is limited by production, the maximum number of hams residents could consume per month is 10.
She is very productive at her consulting job, but not very productive growing vegetables. Time spent consulting would produce far more income than it what she could save growing her vegetables using the same amount of time. So on purely economic grounds, it makes more sense for her to maximize her income by applying her labor to what she does best (i.e. specialization of labor).
The engineer is better at computer science than at painting. Thus, his time is better spent working for pay at his job and paying a painter to paint his house. Of course, this assumes he does not paint his house for fun!

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Introduction

Historical development of economics

Methodological considerations in contemporary economics
Fields of contemporary economics

economics , social science that seeks to analyze and describe the production, distribution, and consumption of wealth. In the 19th century economics was the hobby of gentlemen of leisure and the vocation of a few academics; economists wrote about economic policy but were rarely consulted by legislators before decisions were made. Today there is hardly a government, international agency, or large commercial bank that does not have its own staff of economists. Many of the world’s economists devote their time to teaching economics in colleges and universities around the world, but most work in various research or advisory capacities, either for themselves (in economics consulting firms), in industry, or in government. Still others are employed in accounting , commerce, marketing , and business administration; although they are trained as economists, their occupational expertise falls within other fields. Indeed, this can be considered “the age of economists,” and the demand for their services seems insatiable. Supply responds to that demand, and in the United States alone some 400 institutions of higher learning grant about 900 new Ph.D.’s in economics each year.

(Read Milton Friedman’s Britannica entry on money.)

No one has ever succeeded in neatly defining the scope of economics. Many have agreed with Alfred Marshall , a leading 19th-century English economist, that economics is “a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment, and with the use of the material requisites of wellbeing”—ignoring the fact that sociologists, psychologists, and anthropologists frequently study exactly the same phenomena. In the 20th century, English economist Lionel Robbins defined economics as “the science which studies human behaviour as a relationship between (given) ends and scarce means which have alternative uses.” In other words, Robbins said that economics is the science of economizing. While his definition captures one of the striking characteristics of the economist’s way of thinking, it is at once too wide (because it would include in economics the game of chess) and too narrow (because it would exclude the study of the national income or the price level). Perhaps the only foolproof definition is that attributed to Canadian-born economist Jacob Viner : economics is what economists do.

green and blue stock market ticker stock ticker. Hompepage blog 2009, history and society, financial crisis wall street markets finance stock exchange

Difficult as it may be to define economics, it is not difficult to indicate the sorts of questions that concern economists. Among other things, they seek to analyze the forces determining prices —not only the prices of goods and services but the prices of the resources used to produce them. This involves the discovery of two key elements: what governs the way in which human labour , machines, and land are combined in production and how buyers and sellers are brought together in a functioning market . Because prices of the various things must be interrelated, economists therefore ask how such a “price system” or “market mechanism” hangs together and what conditions are necessary for its survival.

These questions are representative of microeconomics , the part of economics that deals with the behaviour of individual entities such as consumers, business firms, traders, and farmers. The other major branch of economics is macroeconomics , which focuses attention on aggregates such as the level of income in the whole economy, the volume of total employment, the flow of total investment , and so forth. Here economists are concerned with the forces determining the income of a country or the level of total investment, and they seek to learn why full employment is so rarely attained and what public policies might help a country achieve higher employment or greater price stability.

But these examples still do not exhaust the range of problems that economists consider. There is also the important field of development economics , which examines the attitudes and institutions supporting the process of economic development in poor countries as well as those capable of self-sustained economic growth (for example, development economics was at the heart of the Marshall Plan ). In this field the economist is concerned with the extent to which the factors affecting economic development can be manipulated by public policy.

Cutting across these major divisions in economics are the specialized fields of public finance , money and banking , international trade , labour economics , agricultural economics , industrial organization, and others. Economists are frequently consulted to assess the effects of governmental measures such as taxation , minimum-wage laws, rent controls, tariffs , changes in interest rates, changes in government budgets , and so on.

The effective birth of economics as a separate discipline may be traced to the year 1776, when the Scottish philosopher Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations . There was, of course, economics before Smith: the Greeks made significant contributions, as did the medieval scholastics, and from the 15th to the 18th century an enormous amount of pamphlet literature discussed and developed the implications of economic nationalism (a body of thought now known as mercantilism ). It was Smith, however, who wrote the first full-scale treatise on economics and, by his magisterial influence, founded what later generations were to call the “English school of classical political economy,” known today as classical economics .

Saturday, June 17, 2017

The importance of economics.

What to produce? - Is it worth spending more on health care?
How to produce? - Should we leave it to market forces or implement government regulations.
For whom to produce? - How should we distribute resources, should we place higher income tax on the wealthiest in society?

Mass unemployment in the 1930s

Policies to reduce unemployment
Policies to reduce inflation

Market failure - stuck in traffic jam, breathing car fumes

The over production of negative externalities (e.g. pollution/congestion)
The underproduction of goods with positive externalities (e.g. education, health care, public transport).
Non-provision of Public Goods - (national defence, law and order)
Tax negative externalities
Subsidise public services like health care and education.
Carbon Tax - should we implement a carbon tax to reduce global warming?
Should we tax fatty foods?
Efficiency v equality
GDP and Happiness
Economics - The Dismal Science
How to deal/combat global warming?
Does globalisation help or hinder developing countries?
How to live in a society without oil?

15 comments:

a big hand of appluse for the writer of da topic who made it so easy to understand and absorbant. Mrs.Afaque...

this helped me a lot in my school project.a bit problem is there a filipino version?haha!

I really like the blog because of easy and focused approach that writer has used in simple and less words. Useful for those who just want a overview about economics.

very helpful and briefly detailed..thank you, writer.

this will help me 4 sure.. jejeje

your notes really helped me alot. i have my exam tomorrow and and i easily mugged up these notes.

waw! So nice...u realy helped me, thnx alot

thanks a lot to the writer...you just saved me from my prof's course.

Please elaborate on GDP Vs. Happiness?

Economics helps me to manage my money well when in school. thank you writer!

I will like to know how an economist is useful in an electoral decision or organization

I love the blog because the writer explained the importance of economics in simple terms and it helped me a lot with my school assignment

A definition of what an economy means is helpful in understanding the importance of economic systems. The economy is a structured system that uses production, distribution, and services to create a stable environment. Therefore, an economic system is the production, consumption of goods and services with a set of institutions and social relations to create a balanced society. There are a few different types of economic systems such as capitalist, social list, mixed economies and communism. Economic systems do not have to be on a global scale or even a national scale. For example, economic systems such as distributism, the Japanese system, social market economy and Georgism are some of the available options out there. These systems may be state or private. A few are cooperative ownerships. A mixed economy is considered one with a mix of private activity and state planning. The best gauge for the importance of economic systems is balance. The world requires a balance that will ensure the survival of the system. For example, the human race has to find balance with food, shelter, water, and even income in order to survive. Income is necessary in order to buy shelter, food, and other necessities of life. Though money did not exist in the past, we have an economic system that demands income be included in our survival. The UK has a capitalist system which the government maintains order to sustain life in the UK. Since society can be part of economic systems, it is also an important factor in people getting along in a balance of nature. Humans are social by nature therefore an economy that promotes this social interaction will also increase the effectiveness of the economic system in place and the balance of one's life.

thanks man! this helps me for my report tomorrow..

Very easy to understand Thanks

How to Write a Good Economics Essay

Last Updated: July 16, 2024 References

This article was co-authored by Emily Listmann, MA . Emily Listmann is a Private Tutor and Life Coach in Santa Cruz, California. In 2018, she founded Mindful & Well, a natural healing and wellness coaching service. She has worked as a Social Studies Teacher, Curriculum Coordinator, and an SAT Prep Teacher. She received her MA in Education from the Stanford Graduate School of Education in 2014. Emily also received her Wellness Coach Certificate from Cornell University and completed the Mindfulness Training by Mindful Schools. This article has been viewed 128,903 times.

A good economics essay requires a clear argument that is well-supported by appropriately referenced evidence. Research your topic thoroughly and then carefully plan out your essay. A good structure is essential, as is sticking closely to the main essay question. Be sure to proofread your essay and try to write in formal and precise prose.

Preparing to Write Your Essay

For example a question such as “Discuss the macroeconomic consequences of rising house prices, alongside falling interest rates” could be divided into 2 parts: 1 part could be on the effects of rising prices, and 1 on the effects of falling interest rates.
In this example you could begin by discussing each separately and then bringing the 2 together and analysing how they influence each other.
Be sure to keep the question at the forefront of your mind and don’t veer off topic. [1] X Research source

Be sure that you understand all the key terms that you are being asked about.
Try to keep your reading focussed closely to the essay question.
Don’t forget to look at any lecture or class notes you have made.
3 Come up with a thesis statement . A thesis statement is the main argument you will make in your essay. It should be 1-2 sentences long and respond to the essential question that’s being asked. The thesis will help you structure the body of your essay, and each point you make should relate back to the thesis.

Once you have put together a list of key points, then try to add in some more detail that brings in elements from your research.
When you come to write out your essay, you can develop a paragraph based on each point.

All of the evidence and explanation will be in the main body of the essay.
Order the key points in the body of your essay in such a way that they flow logically.
If you are writing a longer essay, you can break the main body into different sections. [2] X Research source
If you have a word limit, be sure to take this into account when you are planning.
Allocate yourself a rough number of words per section.
The introduction and conclusion can be just a paragraph each.

Writing the Essay

What your essay is about.
What material you will cover in the essay.
What your argument is. [3] X Research source

Having this stated clearly at the start can help you to stay focussed on the question as you work your way through the essay.
Try writing out this one or two sentence statement and sticking it up in front of you as you write, so it’s stays at the forefront of your mind.

Try to begin each paragraph with a sentence that outlines what the paragraph will cover.
Look at the opening sentence of each paragraph and ask yourself if it is addressing the essay question. [5] X Research source

Step 4 Provide evidence for your argument.

Try to engage with arguments that run counter to yours, and use the evidence you have found to show the flaws.
It might help to imagine someone reading the essay, and anticipating the objections that he might raise.
Showing that you have thought about potential problems, and you can make an argument that overcomes them, is a hallmark of an excellent essay. [6] X Research source
If there is conflicting evidence, discuss it openly and try to show where the weight of the evidence lies.
Don’t just ignore the evidence that runs counter to your argument.

In the conclusion you can add a few sentences that show how your essay could be developed and taken further.
Here you can assert why the question is important and make some tentative suggestions for further analysis.

Proofreading and Making Revisions

Step 1 Check for divergences away from the question.

As you read through it, think about how closely you stick to main overarching question.
If you notice paragraphs that drift off into other areas, you need to be tough and cut them out.
You have a limited number of words so it’s essential to make every one count by keeping tightly focussed on the main question.

Step 2 Assess the quality and depth of your argument.

Think about how you use the evidence too. Do you critically engage with it, or do you merely quote it to support your point?
A good analytical essay such discuss evidence critically at all times.
Even if the evidence supports your argument, you need to show that you have thought about the value of this particular piece of data.
Try to avoid making any assumptions, or writing as if something were beyond dispute.

Step 3 Check spelling, grammar and style.

Remember an academic essay should be written in a formal style, so avoid colloquialisms.
Avoid contractions, such as “don’t”, or “won’t”.
Try to avoid paragraphs that are more than ten or fifteen lines long.
Think about how it looks on the page. [8] X Research source

Step 4 Check your referencing and bibliography.

Always include a bibliography, but don’t include references to things you haven’t read or didn’t inform your argument. [9] X Research source
Your teacher will know if you just add a load of titles into your bibliography that are not evidenced in the body of your essay.
Always follow the bibliography format used by your department or class.

Community Q&A

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↑ http://carleton.ca/economics/courses/writing-preliminaries/academic-essay-writing/
↑ https://www.economicsnetwork.ac.uk/archive/lse_writing/page_11.htm
↑ https://www.royalholloway.ac.uk/economics/documents/pdf/essaywriting-departmentofeconomics.pdf

About This Article

Before you begin writing your economics essay, make sure to carefully read the prompt so that you have a clear sense of the paper's purpose and scope. Once you have read the prompt, conduct research using your textbook and relevant articles. If you cannot find research materials, ask your instructor for recommendations. After your research is done, construct a 1-2 sentence thesis statement and begin outlining your main ideas so that your essay will have a clear structure. Make sure to leave time to write a draft and revise your work before it is due. If you want to learn more, like how to cite the sources you used for your essay, keep reading the article! Did this summary help you? Yes No

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Department of Economics

Why Study Economics?

Preparing you for an ever-changing world

The study of economics helps people understand the world around them. It enables people to understand people, businesses, markets and governments, and therefore better respond to the threats and opportunities that emerge when things change. Economics majors are well-positioned in an ever-changing world because they have problem solving and analytical skills that allow them to succeed in variety of career paths—law, risk management, actuary, finance, foreign affairs, public administration, politics, policy analysis, health administration, entrepreneurship, market analysis, journalism, and unknown careers of the future.

The breadth and flexibility of an economics degree prepares students to adjust to unexpected changes and take advantage of unexpected opportunities. A study by LinkedIn (PDF, 43 KB) found that college graduates change jobs and careers about four times in the first ten years after graduation. With its wide-ranging applications, economics is a great choice in an ever-changing world.

Providing you with the knowledge and skills that employers want

Economics, at its core, is the study of how to evaluate alternatives and make better choices. It develops critical-thinking and problem-solving skills to make good decisions. It develops analytical skills to examine data to support good decisions. These skills are desired across careers in the public and private sectors. An annual study by the National Association of Colleges and Employers (NACE) consistently finds that employers want the skills gained from studying economics—the ability to make decisions, solve problems, obtain and process information, analyze data, and write and speak effectively.

Ensuring your successful future

No matter what the future holds, an economics major helps people succeed. Understanding how decisions are made, how markets work, how rules affect outcomes, and how economic forces drive social systems will equip people to make better decisions and solve more problems. This translates to success in work and in life.

Though economics majors enjoy relatively high starting salaries, the key indicator of the value of an economics major is long-term success and lifetime earnings. A recent study (PDF, 194 KB) finds the lifetime earnings of economics majors outpaces other business major, social science majors, and even general engineering majors. Another study (PDF, 1.2 MB) finds that lawyers with an undergraduate degree in economics earn $10,000 more annually than other lawyers. And an analysis of S&P 500 CEOs (PDF, 289 KB) showed that economics majors are more likely to become a CEO than any other major.

Enabling you to contribute to the greater good

Economics provides the primary framework for public policy analysis. The major equips people to understand the fundamental policy issues that shape market and social outcomes. An economist understands the immediate issues like tradeoffs, benefits versus costs, market failure, public finance, but also understands the broader issues of generational impacts, welfare impacts, and inequality. Economics majors are equipped with the language and skills to engage in public policy debates and act to advance economic and social progress.

Preparing you for graduate school and law school

Economics imparts clear reasoning and logical thinking. This not only helps people do well personally and professionally, it helps prepare students for graduate programs and law school.

Law school? Studies show (PDF, 60 KB) that economics majors consistently have one of the highest average LSAT scores among all majors. Economics majors also have law school acceptance rates considerably higher than most majors, including pre-law programs.

MBA? Economics majors possess the broad perspective and problem-solving skills that top MBA programs value, and studies show (PDF, 143 KB) they have the highest average GMAT score among all business majors.

Graduate programs? Economics provides a strong foundation for graduate study in economics, public policy, political science, sociology, among others. Students interested in pursuing a graduate degree in economics should consider a minor in math.

Enhancing other majors

Economics can be a valuable complement to most other majors. The breadth and flexibility of an economics major can be an invaluable way for people to diversify when paired with a more career-specific business major like accounting, marketing, finance, or computer information systems, and even more so when paired with a non-business major like computer science, healthcare management, journalism, environmental science, building science, or design.

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7 Reasons Why You Should Study Economics

30 Nov 2017

An economics course can teach you the fundamentals needed to decipher graphs and other important financial data, as well as the tools to develop a successful business strategy.

But how can you know if studying economics is right for you? Consider the possible outcomes of various economics programs and how they compare to your personal and professional goals.

What Is Economics?

At its core, economics is the study of how individuals, groups, and nations manage and use resources.

Economics can be broken down into microeconomics , which examines individual decisions, and macroeconomics , which is concerned with the economy as a whole. Both types of economics utilize historical trends and current conditions to inform business decision-making and make predictions of how markets will behave in the future.

Why Is Studying Economics Important?

Students who choose to study economics not only gain the skills needed to understand complex markets but come away with strong analytical and problem-solving skills, as well as the business acumen necessary to succeed in the professional world.

In fact, economics can be useful for professionals in all industries and aspects of daily life, not just in business.

Access your free e-book today.

7 Reasons to Study Economics

Here’s a look at seven advantages of studying economics and how it can benefit both your organization and career.

1. You'll Expand Your Vocabulary

Whether it’s scarcity (limited resources), opportunity cost (what must be given up to obtain something else), or equilibrium (the price at which demand equals supply), an economics course will give you fluency in fundamental terms needed to understand how markets work. Even if you don’t use these words often in your current role, studying these economic terms will give you a better understanding of market dynamics as a whole and how they apply to your organization.

2. You’ll Put New Terms into Practice

Economics isn’t just learning a set of technical words, it’s actually using them to develop a viable business strategy . Once you understand the terms, it’s easier to use theories and frameworks, like Porter’s Five Forces and SWOT analyses, to assess situations and make a variety of economic decisions for your organization. For example, many companies need to decide whether to pursue a bundled or unbundled pricing model or strategize for the best ways to maximize revenue .

3. You’ll Understand Your Own Spending Habits

Economics will teach you about how your organization and its market behaves, but also offer insights into your own spending habits and values. For example, Willingness to Pay (WTP) is the maximum amount someone is willing to pay for a good or service. There’s frequently a gap between hypothetical and actual WTP, and learning about it can help you decode your own behavior and enable you to make wiser financial decisions.

Demand curve; width: 50px; align: right;

For Shamari Benton, the concepts he learned in Economics for Managers opened his eyes to how everyday decisions are infused with economic calculations and principles.

“A simple grocery store visit becomes filled with economic references and analytical ponders,” Benton says.

4. You’ll Master the Nuances of the Field

Many people think of economics as just curves, models, and relationships , but in reality, economics is much more nuanced. Much of economic theory is based on assumptions of how people behave rationally, but it’s important to know what to do when those assumptions fail. Learning about cognitive biases that affect our economic decision-making processes arms you with the tools to predict human behavior in the real world, whether people act rationally or irrationally.

5. You’ll Learn How to Leverage Economic Tools

Learning economic theory is one thing, but developing the tools to make business decisions is another. Economics will teach you the basics and also give you concrete tools for analysis. For example, conjoint analysis is a statistical approach to measuring consumer demand for specific product features. This tool will allow you to get at the surprisingly complicated feature versus price tradeoffs that consumers make every day.

For example, imagine you work for Apple Inc. and you want to know what part of the iPhone should improve: Battery life, screen size, or camera. A conjoint analysis will let you know which improvements customers care about and which are worth the company’s time and money.

6. You’ll Be Better-Prepared for Graduate School

In addition to helping you make better decisions in both your personal and professional life, learning economics is also beneficial if you’re considering a graduate business degree. Studying economics can equip you with the problem-solving skills and technical knowledge needed to prepare for an MBA .

An MBA typically includes courses in finance, accounting, management, marketing, and economics, so if you decide an MBA is right for you, you’ll already be one step ahead. Furthermore, a foundational knowledge of economics enables you to use economic theories and frameworks to decide if graduate school is worth the financial investment.

7. You’ll Improve Your Career Prospects

An education in economics can improve your employability in a variety of industries. According to the World Economic Forum's Future of Jobs Report , analytical thinking and complex problem-solving skills top the list of transferable skills that employers will find increasingly important by 2025, both of which can be gained by studying economics.

In addition, many careers require knowledge of economic concepts, models, and relationships. Some possible career paths for economics students include finance, banking, insurance, politics, and healthcare administration . You’ll also be able to further your career in your current industry, as an understanding of the economics that power your industry can help you to be more effective in your role.

A Guide to Advancing Your Career with Essentials Business Skills | Access Your Free E-Book | Download Now

Options for Studying Economics

There are many options available for those looking to pursue an education in economics. Depending on your personal and professional goals, your current stage in life, and other important factors, you may choose to pursue an undergraduate or graduate degree in economics or take an online economics course to expand your future career opportunities.

Whether you're new to the business world or an experienced manager, having a thorough understanding of how markets work, pricing strategy, and consumer behavior is essential to success.

Do you want to take your career to the next level? Explore our eight-week online course Economics for Managers or other business essentials courses to learn how to apply economic principles to business decisions.

This post was updated on June 8, 2022. It was originally published on November 30, 2017.

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AP®︎/College Macroeconomics

Course: ap®︎/college macroeconomics > unit 1, introduction to economics.

Four factors of production
Normative and positive statements
Economic models
Lesson summary: Introduction to Macroeconomics
Introduction to scarcity and the economic way of thinking

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Video transcript

Importance of economics in our daily lives

Economics affects our daily lives in both obvious and subtle ways. From an individual perspective, economics frames many choices we have to make about work, leisure, consumption and how much to save. Our lives are also influenced by macro-economic trends, such as inflation, interest rates and economic growth.

Summary – why economics is important

The opportunity costs we face in deciding what to buy – how to use time
How to maximise our economic utility and avoid behavioural bias
How the macro-economic – inflation, economic growth and employment prospects affect our living standards.
Individual markets like housing market can influence our standard of living.
Understanding issues like externalities. We may not like paying petrol tax, but if we see it helps to reduce pollution and congestion and the tax revenue is used to subsides public transport, it gives a different perspective.

Economic choices – opportunity cost

We are constantly faced with choices. It may be a matter of limited time. For example, at the weekend:

We could spend 8 hours working in a cafe at the Minimum Wage of £7.83
Or we could spend 8 hours studying for our A-Levels.
Alternatively, we could choose to spend 8 hours of leisure (sleeping in, Facebook e.t.c.)

Each choice has an opportunity cost. The opportunity cost of earning 8*£7.83 = £62.64 is that we don’t have time to study. This could lead to poorer exam results, which could lead to lower future earning potential. Choosing to maximise our income in the short term (earning £62 a day) may reduce our lifetime earnings and could be a poor decision – unless working in a cafe doesn’t affect our future earnings. We may feel job experience more useful than an essay on allocative efficiency.

The problem is that when making decisions about whether to study, work or pursue leisure, we may forget or ignore long-term effects. Deciding to spend all our free time earning £62 is something we may regret later in life. Economists suggest education is a merit good – meaning people may underestimate the benefits of studying. Under-consumption of education is an example of market failure.

Considering opportunity cost can help us make better decisions. If we act on instinct, we may choose the most pleasurable or easiest course of action, but the best decision in the short term may not be best in long term.

Choice of study vs leisure

A production possibility frontier showing a simple trade off – time spent working or time spent on leisure.

Another important element of life is work. Which job will give the most satisfaction? It is not just about finding a well-paid job, we tend to gain most job satisfaction when we feel part of the process and a degree of responsibility and influence. Behavioural economists such as Dan Ariely have examined motivations for work and find that income/bonuses is less important than suggested by neo-liberal economic theory.

Nudges and rational behaviour

In traditional economics, it is assumed individuals are rational and utility maximising. In other words, it is assumed we calculate decision to maximise our economic welfare – spending money only on those goods which give us satisfaction.

However, behavioural economists note that we are often influenced by irrational and non-utility maximising influences. For example, companies which ‘ nudge ‘ us to make decisions which harm our welfare – e.g. super-sized portions, we don’t really need but cause us to become less healthy.

The importance of the insights of behavioural economics is that we can become aware of factors which may cause us to make sub-optimal decisions. We can try to resist commercial nudges – which encourage us to consume goods which don’t really benefit us.

Behavioural economics and bias

A recent development in economics is the work of behavioural economics – which places more emphasis on elements of psychology. For example, are humans really rational utility maximisers – as suggested by traditional economic theory? Behavioural economics suggests not – but humans are influenced by emotional factors, such as loss aversion (we prefer the status quo, to losing what we have), present time period bias .

Importance of the macroeconomy on our daily lives

When making decisions we don’t tend to first look at leading economic indicators. But, perceptions about the economic outlook can influence certain decisions. For example, those aware of the current economic situation may be aware the depth of the recession which makes a period of low-interest rates more likely. This suggests that if you could get a mortgage, mortgage payments would be cheaper, but, saving would give a poor return.

However, the bad state of the economy and high unemployment rate is a factor that may encourage students to stay on and study. Since youth unemployment is currently very high, it makes more sense to spend three years getting a degree rather than going straight on to the job market.

The only problem is that many other students are thinking the same. Hence the competition for university places is becoming much stronger.

How to survive a period of inflation?

Suppose, we are living in a period of high inflation, how would that affect our economic welfare?

The real value of our savings will decline – unless we can secure an interest rate higher than the rate of inflation. In periods of high inflation, it may be advisable to take out index-linked savings – saving accounts and bonds which give an interest rate related to the inflation rate.

If we cannot secure a good interest rate, an option is to invest in commodities or assets which can protect their value better than ordinary savings accounts

How will we be affected by rising interest rates?

If interest rates increase, then it will increase the cost of mortgage payments and interest on loans and credit cards. It can be problematic for individuals who are over-extended on credit. Higher interest rates can also lead to a slowing economy and increase the risk of unemployment.

Mortgage affordability. High-interest rates in the late 1980s caused mortgage payments to take over 50% of take-home pay from households.

See The effect of higher interest rates .

If we are considering investing in the stock market or housing market, what can economics teach us?

One cautionary tale is that of irrational exuberance – avoid getting caught up in asset booms – where investor confidence gets carried away and people end up buying shares/assets – even though the price has become overvalued.

Externalities

When choosing what to consume and produce, we often ignore externalities. For example, driving into city centre may contribute to pollution and congestion. The social cost of driving is higher than the private cost. Would our living standards be increased by supporting a congestion charge? At first glance, no – we pay higher taxes. But, if there are external costs a higher tax can lead to a more socially efficient level.

A tax can shift output from Q1 to Q2 (which is more socially efficient)

Limitations of economics

As a final thought – is economics overvalued? As a society do we give too much weighting to maximising income, profit and GDP? In a sense, traditional economics encourages us to view life from an economic/monetary perspective. But, perhaps this causes us to miss out on more important issues, such as spiritual understanding, concern for the environment, concern for others and getting the correct work/life balance.

Economics in everyday life
The importance of economics

10 thoughts on “Importance of economics in our daily lives”

Economics is important but sometimes I feel that people like us, accounts in the end fail in many other aspects of life because economics is always our main consideration.

economics is the one important in our daily life.but some people can appreciate how important this.we need to cooperate all people in fair situation like reach even if poor.

,,kathrina,,

ECONOMICS IS IMPORTANT IN OUR DAILY LIVING BECAUSE IT MAKES USE OF SCIENTIFIC PROCEDURE OF FINDINGS.

it isimportant coz it widens our undersatnding which in turn improves the standards of living

economic is important because its science as we as art…….. now how much science and art are important ?……. woooooooooo

Thank you for this informative article on how economics affects our daily lives. I found the opportunity cost to be very interesting, like when you mentioned how we all make choices about what to do with our time and could spend either 8 hours working, 8 hours studying, or 8 hours doing something fun or relaxing. It’s tough to make economic choices on a daily basis but this article was a great beginning insight into how beginning economics work.

This article was very helpful and informative.👍

I have been looking for this Economics of Everyday Life article since long time. Thanks author.

very helpful article, but please help us with references next time. thank you

Comments are closed.

How to Write a Good Economics Essay

Governor November 28, 2019 Real World Applications 3 Comments

Many students ask “How to write an economics essay?” This Guide to Writing a Good Economics Essay is applicable to both IB economics as well as the Singapore JC A-Level H2 economics examinations. Many of the pointers here are also applicable to large-mark case study questions.

6 Steps to Writing a Good Economics Essay

Step 1: dissect the question.

Make sure you analyse and fully understand the KEYWORDS and REQUIREMENTS of the question. This is a very important skill that is taught in our economics tuition classes .

For example, “Best”, “Most Effective” are closely related but mean different things.

Paraphrase the question to make it simpler if necessary.

Take note of the command word (eg: Explain, Discuss) as it determines the approach needed for the essay, for example, whether two sides are needed or one side is sufficient. Below are some common examples found in economics essay questions:

Command Words Action Required

Account for Explain why

Analyse Break it down into step-by-step explanations

Assess For & Against. Consider other factors.

Compare Identify Similarities & Differences

Distinguish Point out differences

Discuss Explore both sides

Evaluate The Good and The Bad.

Explain Show why and how

Explain whether Cover both possibilities

Examine Look closely. How so and how not so?

To What Extent Yes…..But….Judgment

Remember to look out for the context in the question. This is usually given in the form of a country (eg: Singapore). The examples in your essay must be tailored to this particular context (for example, do not suggest interest rate policy for Singapore as that is considered infeasible in the Singapore context). If no context is given, any real-world example can be used.

Keep in mind the question throughout the essay and remember to always answer the question. Don’t go off-point!

Common Examiner’s Comment : Not Answering Question (NAQ))

Step 2: Plan Your Answer

Take some time to consider what economic framework you will use to approach the question. Scribble down your main thesis and anti-thesis points. Ensure they ANSWER THE QUESTION.

Step 3: Essay Introduction

In the introduction, include definitions of keywords in the question and spell out the economic framework you will employ for your answer as well as key definitions.

Step 4: Body of Essay

In the body , there will be several paragraphs.

The number of points/paragraphs depends on the question. It is common to require 2 main points for each 10 mark essay and similarly for 15 mark essay questions. Under each main point, there may be 1-2 sub-points.

Use one paragraph for each sub-point you are making.

However, do not be too focussed on the number of points or paragraphs. The key is to answer the question.

For each body paragraph , use TET’s PEEL(ED) structure. Include only one main idea per paragraph.

Point – Write your point in the first sentence so that markers will know what the paragraph will be about. The topic sentence must directly answer the question!
Explanation – Explain what you mean
Elaboration – Provide further analysis with clear step-by-step economic reasoning. This part may be done with examples as well as diagrams.
Link – Link your explanations back to the Point and to answer the question.
Exemplification – Give an example to support your reasoning. It can be statistics or real-world examples (for Case Studies, evidences from the Case must be uncovered!)
Diagram – Where possible, araw an appropriate diagram with correct labelling and refer to it in your answer. This is crucial to show economic reasoning. Diagrams are very important for economics essays!

These are of course much easier said than done! Thus, students in our economics tuition classes are regularly honed to achieve such output including with tips and tricks to spark off the correct thinking process.

Our resources including the Study Guides for A Level and IB economics also provide a very powerful and handy reference on the depth of analysis required to score the highest marks.

Common Examiner’s Comment : Mere statements and claims. No economic rigour.

Step 5: In-Body Evaluation

This applies especially to the 15 mark essays for A-Level Economics. A total of 5 marks is catered for Evaluation. Students should attempt to achieve about 2-3 in-body evaluation marks by pointing out how the thesis and anti-thesis points may not be true due to certain assumptions made that may not hold. Students may write “However,….may not necessarily happen……It would depend on whether….”. This statement can be written after the associated sub-point has been made.

Step 6: CONCLUDING SECTION

This only applies to the 15 mark essay questions.

Earn more evaluation marks by making a reasoned judgement. Deliver your verdict like a Judge!

Check back on the question before you embark on this. Ensure your judgement answers the question.

So the question now is, how does a judge arrive at and deliver a verdict? Certainly, you should not be summarising or merely paraphrasing your main points in the conclusion. Obviously, you cannot expect more marks by saying the same thing over and over again!

After a verdict and reasons have been provided, consider providing further relevant insights and/or recommendations.

Common Examiner’s Comment : Repetitive. Mere Summary.

Here are some quite common types of Concluding Sections

Consider the relative importance of thesis and anti-thesis factors. Which factors are most important or pertinent in the given context? For example, certain policies better fit specifc types of economies.
Consider short-term vs long-term pros and cons. Do the short-term benefits outweigh the long-term costs? Is the policy more effective in the long-term, and if so, how pressing is the problem that needs to be addressed?
Suggest a multi-policy approach, in which each policy has strengths and weaknesses that allow them to complement each other.

There is no way to really memorise evaluation points as every question and context is different. After all, you are being tested on higher-order thinking!

There are other evaluation tips that our students will receive but the key point here is that the training of the mind to think and apply economics is essential. That is where our weekly economics lessons come into play and that is why our students are often asked questions in class and trained to think on their feet. As ex-student Xue Min from YIJC testified, Chief Tutor Mr. Kelvin Hong does not just spoon-feeds our students but mentors them in their thinking to arrive at the answers. This was different from other tutors that her classmates experienced and eventually this was the key to Xue Min’s A grade.

In your essay, write in simple and clear sentences. Everything you write should be value-adding. You do not have to spend time showing off vocabulary as no extra points are awarded for language. Focus on economic reasoning. Use succinct and effective examples which support the point you are trying to make as well as accurate diagrammatic analyses.

For samples of great economics essays, please check out our free Economics Model Essays and sample Past JC A-Level Economics Questions and Answers .

For our econs publications that are sold worldwide, please check out our A Level & IB Economics Study Guides and Model Essays Publications

About The Economics Tutor

Founded by Kelvin Hong in 1998, The Economics Tutor is one of the leading economics tuition in Singapore . We provide a comprehensive program to guide students in understanding complex economic concepts and applying them through case study analyses, essay writing and discussion of real world events.

For 24 years, the way we teach JC Economics Tuition (A Level Economics Tuition) and IB Economics Tuition classes helped learners appreciate economics and everything it entails on a much larger scale. We take things step-by-step, implement effective techniques in memorising frameworks and give every student the chance to nurture their ideas.

We don’t just solely focus on helping you get stellar grades and perfect scores. We make sure that we also hone the critical thinking skills and investment / business decisions you can use outside the four walls of your classroom.

Looking for a fun, engaging and probably the best economics tutor in Singapore? Look no further—check out our extensive and high quality economics resources on the website such as our IB and A Level Economics Publications

Book your lesson today and master the nuances of economics in our next class!

its good knowledgeable post regarding ib economics commentaries. i just wanted to admin can i use your blog as reference to my students .

Go ahead. We are all for helping students learn economics well.

Thank you, A lot of info!

Top 5 reasons to study economics

Learnings & Academics

Studying economics is more than understanding the economy. It’s about analyzing how individuals, groups and countries manage and use their resources.

Economics is a broad subject—so much so that it’s broken down into macroeconomics (looking at the economy as a whole) and microeconomics (focusing on individual decisions). Both aspects are important to inform future choices and forecast market trends, and by studying them you’ll develop skills to take into any ambitious career.

So what’s the deal with getting an education in economics? We’ve put together our top five reasons below, so you can make an informed decision about your future in economics.

1. Economics is everywhere

Economics is a part of everyday life, and it’s also the gateway to the future. Studying economics gives you a better understanding of market dynamics and from there, you’ll be able to apply your knowledge to different organizations you go on to work with.

What’s more, at IE University, it’s not all theory—you’ll be able to put your new knowledge to work and apply it to different contexts.

The field of economics is also growing at a rapid rate. Cryptocurrencies and fintech are redefining today’s landscape, and those with a solid economic understanding will be those who lead us into a future of limitless possibilities.

2. Make an impact

Economics allows you to drive positive change. It’s a field of study that’s interwoven with technology, management, entrepreneurship and humanitarian progress, so our programs take a hands-on approach to introduce you to these different aspects and their potential for unlocking growth. Our economics programs also enable you to understand the links between these different but interrelated areas, so your future decisions are fully informed.

As the economy is constantly changing, with your knowledge, you’ll be ready to influence business decisions and adapt to fluctuating markets effectively.

3. Gain an international perspective

Economies work in tandem with each other. The links between them will give you an international understanding of how the world works and reveal insights about different cultures, people and societies.

What’s more, studying at IE University will surround you with a unique and international community, so you’ll be expanding your economic horizons and your global mindset at the same time.

4. develop transferable skills.

Studying economics develops a lot of soft skills for you to take into any career. In particular, economics puts you in a prime position to develop your analytical and complex problem-solving skills. Other important skills for our globalized world include communication and cultural awareness, which you’ll also hone with an economics program. Additionally, you’ll improve your business knowledge—an asset that is essential in every corner of the working universe.

Economics programs equip you for graduate success, whatever sector you go on to work in.

5. Boost your career prospects

Economics is the backbone of any sector and you’ll be able to apply your knowledge across a variety of roles. With economics, your potential career paths include (but aren’t limited to!): finance, banking, insurance, law, and governance. Of course, studying economics opens up more senior roles. With a master’s degree in economics, you’ll be in the running for high-level positions.

According to the World Economic Forum’s Future of Jobs Report , analytical thinking and complex problem-solving are top skills for 2025. Economics graduates are already in high demand, and that demand is only going to increase.

Discover economics at IE University!

Studying economics at IE University puts you at the forefront of industry developments and shapes you into an excellent problem-solver.

Author: Lurdes

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Department of Economics >

What is Economics?

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Improve your marketability and meet emerging employers' needs with an advanced degree.

Visit our Prepare for Employment page to learn more about career options, salary statistics and the critical skills that employers are seeking in job prospects in your field. Most importantly, see examples of how UB helps you gain the skills you need to land the job you want.

Economics is the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society.

Economics is More than Numbers

Economics is a social science with stakes in many other fields, including political science, geography, mathematics, sociology, psychology, engineering, law, medicine and business. The central quest of economics is to determine the most logical and effective use of resources to meet private and social goals. Production and employment, investment and savings, health, money and the banking system, government policies on taxation and spending, international trade, industrial organization and regulation, urbanization, environmental issues and legal matters (such as the design and enforcement of property rights), are just a sampling of the concerns at the heart of the science of economics.

Economics is Personal (Microeconomics)

Microeconomics studies the implications of individual human action, and is key to a person's financial health. Personal resources are scarce, too! One can always use another dollar, hour of time, or new skill. Achieving the most satisfactory allocation of one’s resources is crucial, and studying allocation problems improves one’s ability to make both daily and life-long decisions. Some examples of common day-to-day economics questions include: Should I pay cash, borrow or sign a lease to get that new car? Should I take out a home-equity loan or invest in the stock market? Should I open a 401K plan now or wait until next year? Economists understand how to make these decisions in their own lives, and can advise others on a personal or professional level.

Economics is Universal (Macroeconomics)

Macroeconomics studies how the economy behaves as a whole, including inflation, price levels, rate of growth, national income, gross domestic product and changes in employment rates. Some of the important questions American economists try to answer include: “In a nation as rich as the U.S., why are so many people under-employed?” and “Who determines how much money is circulating in the U.S.?” From politicians to educators to journalists to urban planners, a thorough understanding of macroeconomics has a strong impact on leadership skills, decision-making and the ability to plan for a flourishing social future. To meet this need, the Department of Economics has designed a multidisciplinary curriculum that prepares students to maneuver seamlessly from one area of focus to another.

Economics is for You

If you want to understand wealth, poverty, growth, trade, money, jobs, income, depression, recession, prices and monopolies, and study what makes the world work from day to day, you will be fascinated by the complex field of economics!

A State-Ranker’s Guide to Writing 20/20 Economics Essays

So, you want to know how to improve your preliminary and HSC economics essay...

Cory Aitchison

State Ranks (Economics and Chemistry) & 99.95 ATAR

1. Introduction to this Guide

So, you want to know how to improve your preliminary and HSC economics essay writing? Look no further! In this guide, I’ll be covering key tips to help YOU smash the structure, amaze with your analysis, conquer the contemporary, and ultimately master the mystery of maximising your marks.

My name is Cory Aitchison, currently one of the Economics tutors at Project Academy . I completed the HSC in 2018, achieving a 99.95 ATAR as well as two state ranks — 6th in economics and 12th in chemistry. Graduating from Knox Grammar School, I also topped my grade in economics and was awarded Dux of the School for STEM. Believe it or not, at the beginning of Year 11 I initially struggled with economics due to the transition in conceptual thinking required in approaching economic assessments in comparison to my other subjects such as English. However, through Year 11 and Year 12, I built up key tips and strategies — that I’ll be sharing with you in this guide — to help me not only consistently achieve top marks in my internal assessments, but to ultimately go on to achieve the results I did in the HSC.

2. The Correct Way to Write

First off, you need to understand something: HSC economics essays are NOT english essays! They aren’t scientific discussions, nor geography reports, nor historical recounts. They’re unique and often quite different from other essays that you might’ve done previously in high school. The style of writing and approach to answering questions can be confusing at first, but follow these tips and you’ll be ready in no time:

Phrasing should be understandable and concise

Unlike some subjects where sophisticated phrasing is beneficial to getting marks, HSC economics essays should emphasise getting your point across with clarity. This means don’t run your sentences on for too long, be aware of any superfluous words, and make sure you actually understand yourself what you’re trying to say in a sentence.

For example:

GOOD: “An increase in interest rates should lead to decreased economic growth.”

NOT GOOD: “As a result of a rise or increase in interest rate levels from their previous values, the general state of economic activity in the domestic economy may begin to decrease and subsequently indicate the resultant situation of a decrease in economic growth.”

“Understandable” does not mean slang or lacking in terminology

Just because you want to get a point across, doesn’t mean you should resort to slang. In fact, using economic terminology is a strong way to boost your standing in the eyes of the marker — if you use it correctly! Always make sure you use full sentences, proper English grammar, and try and incorporate correct economic terms where possible.

GOOD: “This was a detrimental outcome for the economy.”

NOT GOOD: “This was a pretty bad outcome for the economy.”

GOOD: “The Australian Dollar depreciated.”

NOT GOOD: “The Australian Dollar decreased in value.”

Analysis should be done using low modality

Modality just refers to the confidence of your language — saying something “will” happen is strong modality, whereas saying something “might” happen is considered low modality. Since a large portion of economics is about applying theory, we have to make sure that we are aware that we are doing just that — talking about the theoretical, and so we can’t say for sure that anything will happen as predicted.

Some useful words include:

May, Might, Should, Could, Can theoretically

Don’t use words like:

Must, Will, Has to, Always

3. How to use Statistics

“What’s most important is that this contemporary is used to bring meaning or context to your argument…”

Using contemporary (statistics) can often seem straightforward at first, but using it effectively is usually harder than it looks. Contemporary generally refers to applying real-world facts to your analysis to help strengthen (or weaken) the theoretical arguments. This can include many different statistics or pieces of information, including:

Historic economic indicators, such as GDP, inflation, GINI coefficients, exchange rates, or unemployment rates
Trends or economic goals, such as long-term GDP growth rates, or the stability band for inflation
Names of economic policies, such as examples of fiscal or microeconomic policies
Specifics of economic policies, such as the amount spent on infrastructure in 2017

Whatever statistics you deem relevant to include in your essay, what’s most important is that this contemporary is used to bring meaning or context to your argument — just throwing around random numbers to show off your memorisation skills won’t impress the marker, and in fact might appear as if you were making them up on the spot. Rather, your use of contemporary should actively improve your analysis.

GOOD: “Following a period of growth consistently below the long-term trend-line of 3%, the depreciation of the AUD to 0.71USD in 2017 preceded an increase in economic growth to a 10-year high of 3.4% in 2018.”

NOT GOOD: “Economic growth increased by 1 percentage point in 2017 to 2018”

NOT GOOD: “GDP was $1.32403 trillion in 2017”

GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy — up 30% from 2016’s $31 billion, and 20% higher than the inflation-adjusted long-term expenditure.”

NOT GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy”

That in mind, don’t think that these statistics have to be overly specific. As long as the general ideas gets across, it’s fine. You don’t need to say “$1,505,120” — just “$1.5 million” will suffice.

Ask yourself: if I get rid of the contemporary from my paragraphs, does the essay still have enough content?

Further, don’t get roped into the “contemporary trap” — where you fall into the mindset that “if I memorise all these statistics, my essay will get good marks”. Including numbers and contemporary at the expense of having a robust theoretical explanation and analysis will definitely be detrimental in getting you top marks. Particularly in trial exams and the HSC when you’ve got all these numbers floating in your head, it can be tempting to try and include as many as you can (often just because you can!). To avoid this, always try and focus your arguments on analysis and syllabus content first, contemporary second. Ask yourself: if I get rid of the contemporary from my paragraph, does the essay still have enough content?

4. Must Have Insightful “However”s

If you really want to extend your analysis and show the marker that you know your stuff, including insightful “however”s is a strong way to do it. What I mean by this is that for each of your paragraphs, try and include a counterpoint that highlights the flexible nature of economic theory. There are broadly two kinds of “however”s:

Theoretical “However”s

These are counterpoints that are based on theory — often there will be theoretical limitations for many of the concepts you come across in economics. It’s always important to include these limitations as it reinforces your knowledge of the actual content of economics.

“Although the Budget and fiscal policy can be effective at stimulating economic growth, it is also restricted by the “implementation time lag” limitation since it is only introduced annually.”

Contemporary “However”s

These are counterpoints that are based on contemporary — highlighting how although something should happen theoretically, this isn’t usually what is observed in reality. This can be particularly powerful in that it combines your knowledge of theory with your analysis of contemporary.

“Despite the expansionary stance that the RBA adopted in 2012–2016 for monetary policy, Australia’s annual GDP growth rate has remained below the trend rate of 3% — against the theoretical expectations. This could be attributed to factors such as …”

5. How to Interpret the Question

When you first look at a question, before you even put pen to paper, you need to come up with a plan of attack — how can you ensure that you answer the question correctly, and give the markers what they want? There are three main points to look for when interpreting essay questions:

Knowing your verbs

As you may (or may not) know, NESA has a bank of words that they like to pull from when writing questions, and these words impact how they want their question answered. These verbs should help steer your analysis onto the right path. For example:

Explain: “Relate causes and effects”

To answer these questions, you have to demonstrate a thorough understanding of how theory and events impact each other and the economy. This verb particularly emphasises the idea of a process — you need to be able to make clear links as to how each step leads to the next, rather than just jumping to the outcomes.

Analyse: “Draw out and relate implications”

These questions usually wants you to investigate the connections between different aspects of economic theory. Generally this involves showing a holistic understanding of how different areas (such as micro- and macroeconomic policies) come together to make a cohesive impact on the economy. It usually helps to think back to the syllabus and how the points are introduced when figuring out which ideas to link together.

Assess/Evaluate: “Make a judgement based on value/a criteria”

These require you to not only critically analyse a topic but also come to a conclusion given the arguments you provided. This type of question usually gets you to make a judgement of the effectiveness of some economic theory — such as the ability for economic policies to achieve their goals. Make sure you actually include this judgement in your answer — for example, say things like “strong impact”, “highly influential”, “extremely detrimental”.

Discuss: “Provide points for and/or against”

Similar to assess, discuss wants you to provide arguments towards and against a particular topic. Although it doesn’t require a specific judgement to be made, it does place greater emphasis on showing a well-rounded approach to the argument — providing relatively equal weightings towards both the positive and negative sides of the discussion.

Linking to the syllabus

When trying to understand what the question wants from you, I found the best way to approach it is to consider what points in the syllabus it is referring to (To do this, you need to have a solid understanding of the syllabus in the first place). Once you’ve located it, try drawing upon other topics in the vicinity of that dot point to help you answer the question.

For example, if the question mentions “trends in Australia’s trade and financial flows”, then you know from the syllabus that you probably need to talk about value, composition and direction in order to get high marks. Further, it may also be worth it to bring in ideas from the Balance of Payments, as this is the next dot point along in the syllabus.

Digging into the source

For essay questions that provide a source for you to include in your answer, this is another goldmine from which you can discern what the marker really wants. If the source mentions microeconomic policy, it probably wasn’t on accident! Even if it may not be obvious how to link that to the question immediately, try and draw upon your knowledge and implications and see if there’s a different angle that you might be missing.

6. Putting it All together — Structuring your essay

My essays usually consisted of four main parts: an introduction, a background paragraph, body paragraphs, and a conclusion.

Introduction

Your introduction should not be long. I rarely wrote an introduction longer than three sentences.

First sentence: Answer the question (thesis)

Try and answer the question, while including the main key words of the question in your answer. Don’t directly restate it — instead, try and add meaning to it in a way that represents what you’re trying to get across in your essay.

For example: if the question was “Assess the impact of microeconomic policy in improving economic growth in Australia”, my first sentence might be “Microeconomic policy has had a significant impact in increasing aggregate supply and thus long-term economic growth in Australia since the 1960s”.

Next sentences: Introduce your arguments/paragraphs

In this part, it’s fine to almost list your paragraphs — there’s no need to do a whole sentence explaining each. That’s what the paragraphs themselves are for.

For example: using the same question as above, my next sentence might be “Although trade liberalisation may have been detrimental for short-term growth in manufacturing, policies such as competition policy and wage decentralisation have been highly effective in fostering economic growth in Australia”.

Background Paragraph

The aim of a background paragraph is threefold: to get across the main theory that underpins your argument; to establish the economic context for your argument; and to show the marker that you “know your stuff”.

For example, if the essay was on monetary policy, you may want to describe the process of Domestic Market Operations (how the reserve bank changes the cash rate) in your background paragraph, so that you don’t need to mention it each time you bring up changing stances. Further, it may be good to showcase the current economic climate — such as GDP growth rate and inflation — to give context to your analysis in your essay.

Some ideas for what to include in this paragraph include:

Key theory such as DMOs or the rationale for macroeconomic policies
Economic indicators that provide context to the time period that you’re working in, such as growth rates, inflation, unemployment rates, exchange rates, cash rates, etc.
A brief description of the recent Budget (if talking about fiscal policy), including the stance and outcome

Bear in mind that this paragraph shouldn’t be too long — it isn’t the focus of your essay! Instead, aim for around 100–150 words at most. At this point in your essay, it may also be good to include a graph (more on this later).

Body Paragraphs

There’s no set rule for how many body paragraphs to include in your essay — I generally aim for at least 4, but there’s no real limit to how many you can (or should) write! Unlike english essays, it’s totally acceptable to just split a paragraph in two if you feel like the idea is too large to be written in one paragraph (as long as each paragraph makes sense on its own).

When writing a paragraph, I usually follow this structure:

Topic sentence

This is where you answer the question, and outline your argument or idea for this paragraph. If you are doing a discuss/assess/evaluate essay, try and make your judgement or side obvious. For example: “Trade liberalisation has been detrimental in its impact on economic growth in manufacturing industries”.

These sentences are where you bring together the theory and contemporary to build up your argument. Remember, the theory should be the focus, and contemporary a bonus. Try and weave a “story” into your analysis if you can — you should be showing the marker how everything fits together, how causes lead to effects, and ultimately bringing together relevant economic concepts to answer the question. Feel free to also include graphs here when they help strengthen your argument.

Fit in your “however” statements here. For discuss questions, this however section may take up a larger part of the paragraph if you choose to showcase two opposing arguments together.

Link your argument back to your overarching thesis, and answer the question. Following on from your “however” statement, it can often be a good idea to use linking words such as “nevertheless”, “notwithstanding”, or “despite this” to show that taking into account your arguments presented in the “however” statement, the overarching idea for the paragraph still remains.

Like the introduction, your conclusion should not be overly long. Rather, it should briefly restate the arguments made throughout your essay, and bring them all together again to reinforce how these points help answer the question.

Aggregate Demand / Supply Graph

Graphs are a great way to add extra spice to your essay — not only does it help strengthen your explanations of economic theory, it also makes it look like you wrote more pages than you actually did! Graphs, such as aggregate demand graphs, business cycle graphs, and Phillips curves, can be great in reinforcing your ideas when you mention them in your essay. They usually come either in background paragraphs or body paragraphs, and it’s usually best to draw them about a quarter to a third of the page in size. It’s also good practice to label them as “Figure 1” or “Graph 1”, and refer to them as such in your actual paragraph.

Although they can be beneficial, don’t try and force them either. Not all essays have appropriate graphs, and trying to include as many as you can without regards for their relevance may come across negatively in the eyes of the marker.

8. How to Answer Source Questions

If your essay question involves a source, try and refer to it multiple times throughout your essay. For example, this can be in the background paragraph and two of your body paragraphs. Rather than just adding in an “…as seen in the source” to one of your sentences, try and actively analyse it — show the marker that you understand why they included it, and how it actually helps strengthen your arguments.

9. Plan You Essay

Don’t be afraid to use the first page of your answer booklet as a planning page. Taking a couple minutes before you answer the question to lay out your scaffold for body paragraphs is a great first step to helping ensure that you actually end up answering the question to the best of your abilities. It also serves as a great reminder to keep checking as you finish each paragraph to ensure that you actually wrote what you intended. Just make sure to make it clear to the marker that those scribbles on the page are just a plan, and not your actual essay!

10. How to Prepare for Essays in the Exam

I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself.

Don’t go into the exam with a pre-prepared essay that you are ready to regurgitate — not only are there too many possibilities to prepare for, but it’s also unlikely that you’ll actually answer the question well with a pre-prepared response.

Instead of memorising sets of essays before the exam, I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself. What I mean by this, is that in your mind you have a “bank of different paragraphs” and ideas from all the topics in the syllabus, and when you read the exam, you start drawing from different paragraphs here and there to best formulate a response that answers the question. This allows you to be flexible in answering almost any question they can throw at you.

On top of this, ensure you have a solid foundation in both the theory and contemporary — knowing what statistics or topics to include in your essay is useless knowledge unless you have the actual content to back it up.

Now that you know the basics of how to write a good HSC economics essay, it’s time to start practising! Have a go, try out different styles, and find what works best for you. Good luck!

If you would like to learn from state ranking HSC Economics tutors at Project Academy, we offer a 3 week trial for our courses. Click to learn more !

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Importance of studying economics

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Economics plays a role in our everyday life. Studying economics enables us to understand past, future and current models, and apply them to societies, governments, businesses and individuals.

What is economics?

To understand why the study of economics is important, we first need to understand what economics is.

Collins English Dictionary defines economics as: “The study of the way in which money, industry, and trade are organised in society.”

Considered a social science, economics uses scientific methods to understand how scarce resources are exchanged within society. Economists study theories and techniques useful for developing policies in government as they have a deep understanding of how to create efficiency in today’s world.

American economist Thomas Sowell provides another useful definition: “Economics is the study of cause-and-effect relationships in the economy.”

So, why is economics important? This inquiry into cause-and-effect relationships is key to influencing economic growth. Economists will look at risks and benefits on people, the job market and society as a whole when advising how to allocate resources.

Economic theories

There are many different areas of economics you can study. You can look at these at macroeconomic (large-scale) or microeconomic (individual) levels.

There are four types of economic systems:

Traditional economic system
Command economic system
Market economic system
Mixed economic system

Economics in real life

Applied economics is the term used to describe how economic theories can be applied to real-world situations. This looks at everything from costs and benefits to predicted human behaviour to make an informed decision.

So, why do we study economics? Here are five reasons why studying economics is important.

1. Informs decisions

Economists provide information and forecasting to inform decisions within companies and governments. This knowledge of economics – or economic intelligence – is based on data and modelling.

2. Influences everything

Economic issues influence our daily lives. This includes issues such as tax and inflation, interest rates and wealth, inequality and emerging markets, and energy and the environment. A broad subject, economics provides answers to a range of health, social and political issues that impact households and wider communities.

3. Impacts industries

Firms of all sizes and industries have to rely on economics, whether that’s for product research and development, pricing strategies or how to advertise. This wide influence means studying economics can open up a variety of career options across all sectors of the economy, from agriculture to manufacturing, to banking and consultancy.

4. Inspires business success

Understanding how consumers behave is vital for a business to succeed. Economists use theories and models to predict behaviour and inform business strategies. For example, how to analyse ‘big data’.

5. International perspective

Economics affects the world we live in. Understanding domestic and international perspectives – historic and current – can provide a useful insight into how different cultures and societies interact. For international corporations, understanding the world economy is key to driving success.

Should I study economics?

An economics course will give you an in-depth understanding of core economic theory and how to apply it to the real business world.

You will also develop a range of transferable skills, such as:

communication
problem solving
time management.

Economics is a widely respected field of study and provides an alternative to an Accounting and Finance degree as it offers similar career opportunities for graduates. You could work in job roles within a range of industries, such as:

Accountancy
Consultancy

Study Economics at Durham

Durham University International Study Centre provides a specialist pathway programme for international students. After successful completion of the International Foundation Year in Business, Economics, Accounting and Finance , students can progress to study BA (Hons) Economics at Durham University Business School.

Durham University offers a BA (Hons) Economics degree ranked 14th in the UK by the Guardian University League Table, 2020. The subject is also ranked top for graduate employment and further study in the HESA survey (2016/17).

Helen Dey teaches Mathematics at the International Study Centre. She shares what she enjoys about the subject and how its applied to the world around us:

“I love teaching maths, because it's the best subject in the world. I think it unlocks a lot of keys within science. One of my favourite areas is calculus. It explains a lot that goes on in the physical world, as well as economics and business, and science and engineering. Maths is something I want to share with the students and pass on my experience and knowledge.”

"I chose to study at Durham University because the University’s reputation speaks for itself. The years of success and good accomplishments made me want to go to this University. It’s quite hard to get into Durham, so it’s very challenging for me too. Studying here is going to have a huge impact on their future careers and their future in general."

Jad from Lebanon Studying International Foundation Year in Business, Economics, Accounting and Finance Aiming to study BA (Hons) Business and Management

Frequently asked questions

What is the study of economics.

The study of economics is not only about money, numbers or mathematics. It's another way of looking at the world. To truly understand economics, you will also study aspects of politics, history, psychology and sociology.

What are courses in economics?

Courses in economics are a way for you to study more about the subject of economics and prepare for a career in the industry.

Does economics have a future?

Economics isn't going anywhere. People well-versed in the subject will continue find job opportunities in various sectors such as banking, finance, business and consultancy.

Search Search Please fill out this field.

What is the Sahm Rule?

How the sahm rule works, types of sahm rule indicators, history of the sahm rule, limitations of the sahm rule, the bottom line, the sahm rule recession indicator definition and how it's calculated.

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

pixelfit / Getty Images

The "Sahm Rule" is a recession indicator created and named after Claudia Sahm, a macroeconomist who worked at the Federal Reserve and the White House Council of Economic Advisers. According to the Sahm Rule, the early stages of a recession is signaled when the three-month moving average of the U.S. unemployment rate is half a percentage point or more above the lowest three-month moving average unemployment rate over the previous 12 months.

The Sahm Rule has been widely recognized for its accuracy, simplicity, and ability to quickly reflect the onset of a recession.

Key Takeaways

The Sahm Rule is a indicator that looks at signals related to the onset of a recession.
According to the rule, the early stages of recession are signaled when the three-month average unemployment rate moves above the lowest three-month moving average unemployment rate over the last 12 months by half a percentage point or more.
The rule has become widely recognized as a recession indicator due to its accuracy and simplicity.
The Sahm rule was first introduced by macroeconomist Claudia Sahm in 2019 as part of a policy proposal.

The unemployment rate represents the percentage of the overall labor force that is unemployed. The rate tends to rise when the economy is struggling and workers are having difficulty finding jobs, and fall when the economy is strong and workers can more easily find jobs. The Bureau of Labor Statistics (BLS) typically releases the unemployment rate for the previous month on the first Friday of every month. The unemployment rate is one of the main economic indicators used to measure the health of the economy, and the Sahm Rule inputs the rate into a simple formula to determine whether the U.S. is headed into a recession.

The rule compares the value of the current three-month moving average unemployment rate to the value of the lowest three-month moving average unemployment rate over the last 12 months. If the former is half a percentage point or more above the latter, the Sahm Rule indicates that U.S. is in the early stages of a recession. The Sahm Rule uses the three-month moving average unemployment rate—rather than the current unemployment rate—to prevent overreacting to a single month of data, Sahm said as a guest on The Investopedia Express podcast released in April 2024.

The Sahm Rule simply indicates that the economy is in the early stages of a recession. Since the early 1970s, the indicator has never been triggered outside of a recession, according to Sahm. Historically, when the unemployment rate passes the threshold outlined by the Sahm rule, it continues to increase.

The Federal Reserve Economic Data (FRED) database includes current and real-time Sahm Rule recession indicators.

Current Sahm Rule Recession Indicator

The BLS regularly revises the unemployment rate of previous months based on additional information from its survey that was not initially available. The current Sahm Rule recession indicator is calculated using the unemployment rate's revised values.

Real-Time Sahm Rule Recession Indicator

Unlike the current Sahm Rule recession indicator, the real-time Sahm Rule recession indicator uses "real-time" data. It is calculated using just the unemployment rate and recent history of unemployment rates that were available in a given month.

Sahm first introduced the indicator that would later be named after her as part of a policy proposal called "Direct Stimulus Payments to Individuals" published by The Hamilton Project, an economic policy initiative that is part of the Brookings Institution. The proposal was also included in The Hamilton Project's book "Recession Ready: Fiscal Policies to Stabilize the American Economy" published in 2019.

In the proposal, Sahm explained that consumer spending tends to slow significantly during recession growth, which can make job losses (and a recession overall) worse. She proposed that to combat that unemployment, the government distribute stimulus payments automatically to families in the face of a recessions—specifically, when the three-month average national employment rate jumps at least half a percentage point relative to its low over the last 12 months.

"Recent research finds that broadly distributed, lump-sum payments to individuals directly boost spending and help stabilize demand, making these types of payments effective responses to recessions," Sahm explained. "The total amount of stimulus would offset about half of the slowdown in consumer spending, totaling about 0.7 percent of GDP." Gross domestic product (GDP) refers to a country's total market value of goods and services within a certain time frame. Fiscal policies like the one Sahm proposed are known as automatic stabilizers .

The indicator became widely recognized, with the Federal Reserve adding it to the FRED database in October 2019.

As Sahm has pointed out in her newsletter, the rule is "empirical regularity," not a proposition. She emphasized that this means that the rule can also be broken.

For example, Sahm wrote in an April 2022 newsletter, imagine a scenario in which the unemployment rate increased hovered around 3.5%, up from a low of 3.0%, meeting the criteria for signaling the early stages of a recession based on the Sahm Rule. However, if around that same time, GDP growth held around 2.5%, down from a high of 5.5%, and inflation gradually slid down to 2%, such a combination of circumstances probably wouldn't constitute a recession, she explained.

What is the Sahm Rule today?

First introduced in 2019, the Sahm Rule is a recession indicator based on conditions of the labor market. When the three-month average unemployment rate rises above its 12-month low by at least half a percentage point, we are in the early stages of a recession, according to the rule.

Who created the Sahm Rule?

Claudia Sahm, a macroeconomist who worked at the Federal Reserve and the White House Council of Economic Advisers, introduced the indicator as part of a policy proposal. The rule was then named after her.

How Accurate is the Sahm Rule?

The rule has proved to be very accurate with the indicator always triggering in the early stages of a recession and never outside of one since the 1970s.

The Sahm Rule refers to an indicator that signals the early stages of a recession. According to the rule, the beginning of a recession is signaled when the three-month moving average unemployment rate is half a percentage point or more higher than the lowest three-month moving average unemployment rate over the last 12 months. Historically, when the unemployment rate has passed this threshold, it has continued to rise.

Sahm Consulting. " About ."

U.S. Bureau of Labor Statistics. " Release Calendar: List View ."

Sahm, Claudia. " Direct Stimulus Payments to Individuals ." The Hamilton Project, The Brookings Institute , May 2019, pp. 77.

Sahm, Claudia. " Direct Stimulus Payments to Individuals ." The Hamilton Project, The Brookings Institute , May 2019, pp. 77-79.

Economic Research, Federal Reserve Bank of St. Louis. " FRED Adds Sahm Rule Recession Indicators ."

The Hamilton Project. " Direct Stimulus Payments to Individuals ."

The Hamilton Project. " Recession Ready: Fiscal Policies to Stabilize the American Economy ."

Stay-At-Home-Macro. " Rules Are Made to Be Broken ."

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08-06-2024 NEWS

Undocumented immigrants pay almost $100 billion in taxes, study says

The Institute on Taxation and Economic Policy reports that undocumented immigrants paid billions in 2022 for services they are often barred from accessing.

[Source Photo: Getty Images]

BY Shalene Gupta 1 minute read

Anti-immigrant sentiment is on the rise: This year , more than half (55%) of Americans said they’d like to see immigration decline, a first since 2001. In June , President Joe Biden restricted the number of asylum seekers entering the country, and Republicans are promising the “ largest mass deportation program in American history ” if they win the White House this fall.

That stems in part from a belief that immigrants, particularly undocumented ones, are a drain on the government’s resources while contributing nothing. However, a new study from the Institute on Taxation and Economic Policy shows that the opposite is true. Undocumented immigrants actually contributed almost $100 billion in taxes during 2022, while not being able to use many of the programs their tax dollars funded.

Here are the key findings of the study:

Undocumented immigrants are a large source of tax dollars: In 2022, they paid $96.7 billion, of which $60 billion went to the federal government. For each 1 million undocumented immigrants, federal services receive an additional $8.9 billion in tax revenue. More than a third of the taxes these immigrants pay go toward programs they cannot access, such as Social Security ($25.7 billion), Medicare ($6.4 billion), and unemployment insurance ($1.8 billion).
Undocumented immigrants often pay higher tax rates than U.S. citizens: In 40 states, undocumented immigrants pay higher state and local taxes than the top 1% of households. They also cannot receive many tax credits, often don’t realize that they can claim refunds, and often don’t have access to tax help.
Work authorization would be a win-win: Giving undocumented immigrants work authorization would result in an increase of their tax contributions from $40 billion to $137 billion per year since work authorization would increase wages.

“In total, the federal tax contribution of undocumented immigrants amounted to $59.4 billion in 2022, while the state and local tax contribution stood at $37.3 billion,” the study’s authors wrote. “These figures make clear that immigration policy choices have substantial implications for public revenue at all levels of government.”

Apply to the Most Innovative Companies Awards and be recognized as an organization driving the world forward through innovation. Early-rate deadline: Friday, August 23.

ABOUT THE AUTHOR

Shalene Gupta is a frequent contributor to Fast Company, covering Gen Z in the workplace , the psychology of money , and health business news. She is the coauthor of The Power of Trust: How Companies Build It, Lose It, Regain It (Public Affairs, 2021) with Harvard Business School professor Sandra Sucher, and is currently working on a book about severe PMS, PMDD, and PME for Flatiron More

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Privatization's Impacts on State-Owned Enterprises: A Tale of Zombie versus Healthy Firms

We estimate the effects of privatization on zombie versus healthy state-owned enterprises (SOEs) in China, extending our analysis beyond TFP to a broad array of financial and economic indicators. Privatizing zombie SOEs enhances labor productivity and TFP, reduces bank and government subsidies, alleviates leverage and administrative expenses, improves liquidity, boosts profits, and accelerates sales growth. These benefits are more pronounced than for healthy SOEs and are robust across regions and industries. Our findings offer policy implications for emerging markets, suggesting that prioritizing the privatization of underperforming, zombie-like entities can lead to substantial economic improvements and greater efficiency.

We thank Camelia Minoiu, Wei Xiong, and Daniel Xu for helpful comments. The views expressed herein do not necessarily reflect the views of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the National Bureau of Economic Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

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Food as You Know It Is About to Change

Credit... Alma Haser

Supported by

By David Wallace-Wells

Opinion Writer

July 28, 2024

This essay is part of What to Eat on a Burning Planet, a series exploring bold ideas to secure our food supply. Read more about this project in a note from Eliza Barclay, Opinion’s climate editor.

From the vantage of the American supermarket aisle, the modern food system looks like a kind of miracle. Everything has been carefully cultivated for taste and convenience — even those foods billed as organic or heirloom — and produce regarded as exotic luxuries just a few generations ago now seems more like staples, available on demand: avocados, mangoes, out-of-season blueberries imported from Uruguay.

But the supermarket is also increasingly a diorama of the fragility of a system — disrupted in recent years by the pandemic, conflict and, increasingly, climate change. What comes next? Almost certainly, more disruptions and more hazards, enough to remake the whole future of food.

The world as a whole is already facing what the Cornell agricultural economist Chris Barrett calls a “food polycrisis.” Over the past decade, he says, what had long been reliable global patterns of year-on-year improvements in hunger first stalled and then reversed. Rates of undernourishment have grown 21 percent since 2017. Agricultural yields are still growing, but not as quickly as they used to and not as quickly as demand is booming. Obesity has continued to rise, and the average micronutrient content of dozens of popular vegetables has continued to fall . The food system is contributing to the growing burden of diabetes and heart disease and to new spillovers of infectious diseases from animals to humans as well.

And then there are prices. Worldwide, wholesale food prices, adjusted for inflation, have grown about 50 percent since 1999, and those prices have also grown considerably more volatile, making not just markets but the whole agricultural Rube Goldberg network less reliable. Overall, American grocery prices have grown by almost 21 percen t since President Biden took office, a phenomenon central to the widespread perception that the cost of living has exploded on his watch. Between 2020 and 2023, the wholesale price of olive oil tripled ; the price of cocoa delivered to American ports jumped by even more in less than two years. The economist Isabella Weber has proposed maintaining the food equivalent of a strategic petroleum reserve, to buffer against shortages and ease inevitable bursts of market chaos.

Price spikes are like seismographs for the food system, registering much larger drama elsewhere — and sometimes suggesting more tectonic changes underway as well. More than three-quarters of the population of Africa, which has already surpassed one billion, cannot today afford a healthy diet; this is where most of our global population growth is expected to happen this century, and there has been little agricultural productivity growth there for 20 years. Over the same time period, there hasn’t been much growth in the United States either.

How climate change could transform yields of two major crops

Projected change in corn and wheat yields in 2050, based on an upper-middle scenario for global warming.

Change in crop yield in 2050

Corn production in 2050

Drought conditions have already led Mexico to import a record amount

of corn in recent years. Climate change could further decrease its yields.

China is the world’s second-largest

producer of corn, but yields are projected to decrease across most of the country.

Wheat production in 2050

Pakistan, where wheat accounts for nearly two-thirds

of all calories

consumed, could

see sharp declines.

The U.S., one of the largest exporters of wheat, could see increased yields, especially in more northern latitudes.

Drought conditions have already led Mexico to import a record amount of corn in recent years. Climate change could further decrease its yields.

Rising temperatures could make the highlands of Peru

a more productive area for corn.

Pakistan, where wheat accounts for nearly two-thirds of all calories consumed, could see sharp declines.

producer of corn,

but yields are

projected to decrease across most of the country.

consumed, could see sharp declines.

Sources: Jägermeyr et al. (2021) “ Climate Impacts on Global Agriculture Emerge Earlier in New Generation of Climate and Crop Models ,” Nature Food ; World Bank; U.S.D.A.

Note: Yields shown are for the SSP370 middle-upper warming scenario and are compared with a 1983-2013 baseline.

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DOI: 10.61511/ecoprofit.v2i1.2024.919
Corpus ID: 271608888

Local economic development strategy through hiking tourism: A case study of the selo trail on Mount Merbabu

Muhammad Aqil Hasan
Published in EcoProfit: Sustainable and… 31 July 2024
Economics, Environmental Science, Geography
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1.1 What Is Economics, and Why Is It Important?

Introduction to FRED

The Problem of Scarcity

The Division of and Specialization of Labor

Why the Division of Labor Increases Production

Trade and Markets

Why Study Economics?

What Is Economics?

Introduction

Definitions and Basics

In the News and Examples

A Little History: Primary Sources and References

Advanced Resources

Related Topics

1.1 What Is Economics, and Why Is It Important?

What is a good and what is a service?

The Problem of Scarcity

The Division of and Specialization of Labor

Why the Division of Labor Increases Production

Trade and Markets

Why Study Economics?

Key Concepts and Summary

Self-Check Questions

Review Questions

Critical Thinking Questions

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Historical development of economics

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How to Write a Good Economics Essay

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Department of Economics

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7 Reasons Why You Should Study Economics

What Is Economics?

Why Is Studying Economics Important?

7 Reasons to Study Economics

1. You'll Expand Your Vocabulary

2. You’ll Put New Terms into Practice

3. You’ll Understand Your Own Spending Habits

4. You’ll Master the Nuances of the Field

5. You’ll Learn How to Leverage Economic Tools

6. You’ll Be Better-Prepared for Graduate School

7. You’ll Improve Your Career Prospects

Options for Studying Economics

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AP®︎/College Macroeconomics

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Video transcript

Importance of economics in our daily lives

Summary – why economics is important

Economic choices – opportunity cost

Nudges and rational behaviour

Behavioural economics and bias

Importance of the macroeconomy on our daily lives

How to survive a period of inflation?

How will we be affected by rising interest rates?

Externalities

Limitations of economics

10 thoughts on “Importance of economics in our daily lives”

How to Write a Good Economics Essay

6 Steps to Writing a Good Economics Essay

Step 2: Plan Your Answer

Step 3: Essay Introduction