Daily life use of Economics

“How is this even going to help us in real life?!” is a question which must have rung your ears multiple times in a Maths class while solving algebraic equations but do similar doubts arise in the back of your mind when studying Economics as well?

You might think that Economics is all about stock markets crashing due to the US-China Trade War or about how the economies collapsed in the 2008 Global Financial Crisis, without realizing that you might be a savvy economist in your own life. If  you feel conflicted between buying that Melbrew Coffee, priced at Rs.700, or just making the coffee at home with Nescafe Sachets so that you can save that extra Rs.700; you are weighing the Opportunity Cost. Opportunity Cost is the value of the next best alternative forgone, so if you make the Nescafe Coffee at home, your opportunity cost will be the extra taste or satisfaction you could have derived from the expensive coffee. This shows that there is a constant cost-benefit analysis  running in the back of your mind.

Whenever your parents get a salary hike, do you not see your mother running to the nearest mall to buy more clothes even when it isn’t necessary? This demonstrates the concept of normal goods and inferior goods where a consumer’s willingness and ability to buy a normal good increases as their income rises and vice versa for an inferior good because the normal goods in consideration are usually normal luxuries meaning they aren’t a need but a want.

Did you ever think your mom’s retail therapy would ever be a concept developed in the membranes of economists like Alfred Marshall and Sir Robert Giffin who laid the seeds of groundbreaking economic theories which form the foundation of our daily consumption.

There are uncountable examples of how economics leads our everyday thinking but due to information failure people fail to recognise its significance (see how i subtly fitted in another concept). Economics provides us a structured framework and rationale for understanding how societies navigate through the basic economic problem of scarcity which refers to the problem of nations not being able to cater infinite wants due to finite resources.

Ultimately, economics is just not about money or markets; it magnifies tiny decisions into important choices which may lead to even greater consequences depending on the rationality of decisions made by economic agents (entities that form an economy including consumers, firms and the government). It empowers us to better manage our personal resources by comprehending social frameworks that shape our world and our lives within it.