Importance of the study of
Economics: The
Importance /advantages/ Objectives of the study of economics are as under:
(1) Intellectual Value: The knowledge of Economics is very
useful as it broadens our outlook, sharpens our intellect, and inculcates in us
the habit of balanced thinking. The study of Economics makes us realize that we
as human beings are dependent upon one another for our daily needs. This
feeling creates in us the intelligent appreciation of our position and the
spirit of co-operation with others.
(2) Practical Advantages: The practical advantages of
Economics are much more important than its theoretical advantages. These
advantages can be looked at from the individual and community point of view.
(3) Personal Stake in Economics: From personal point of view, the
study of Economics is useful as it enables each of us to understand better and
appreciate more intelligently the nature and significance of our money earning
and money spending activities. With the knowledge of Economics, the consumer
can better adjust his expenditure to his income. The study of Economics is also
useful to a producer. It suggests him the ways of bringing about the most
economical combinations of the various factors of production at his disposal.
It also helps in solving the various intricacies of exchange. From the study of
Economics, one can easily judge as to why the prices have risen or fallen. The
knowledge of Economics also explains us as to how the reward of various factors
of production is determined. Thus, we find that every’ individual can rightly
hope to become a better and more efficient consumer, producer and businessman,
if he has the working knowledge of economics.
(4) Economics for the Leader: The study of economics is not only
helpful from the individual point of view but it is also very useful for the
welfare of the community. It enables a statesman to understand and better grasp
the economic and social problems facing the country. Every government has to
tackle different kinds of economic problems such as unemployment, inflation,
over production, under-production, imposition of tariffs and control, problem
of monopolies, etc. the statesman can successfully solve these problems, if he
has thorough knowledge of the subject of Economics. The knowledge of Economics
for a finance minister is also indispensable. He has to raise revenue by
imposing taxes on the incomes of the people for meeting the necessary
expenditure of the government. Economics here comes to his rescue and guides
him as to how the taxes could be levied and collected.
(5) Poverty and Development: The greatest advantage of Economics
is that it helps in removing traces of poverty from the country. Take the case
of Pakistan; we in Pakistan are confronted with different kinds of problems.
For example, low-per capita income, low productivity of agriculture, slow
development of industries, fast increase in population, under-developed means
of communication and transport, etc. The study of Economics helps in devising
ways and means and suggesting practical measures in solving these problems.
(6) Economics for the citizen: Such being, the importance of study
of Economics, it is rightly remarked by Wooten that “you cannot be in real
sense a citizen unless you are also in some degree an economist”. He is
perfectly right in giving the statement. The world is so fast changing that we
are completely now living in a world dominated by economic forces and economic
ideas. If the people of any country do not have the working knowledge of an
economic system; then the government of that
country can easily hoodwink citizens have knowledge of Economics, then
the government will be very vigilant and spend the money in a wise manner.
The
importance of the study of Economies can also be judged from this fact that the
daily newspapers cannot be understood without some knowledge of Economics. The
newspapers often describe complicated economic problems such as inflation,
balance of payment, balance of trade, imperfect markets, dumping, co-operative
farming, sub-division and fragmentation of holdings, mechanization of
agriculture, If you do not have working knowledge of Economics, you cannot
understand these diverse problems.
From brief
discussion, we conclude, that the knowledge of Economics is very useful. As
such it is necessary that every citizen, bankers, worker, administrator,
consumer, etc., should have at least working knowledge of it. In the words of
Sir Henry Clay: “Some study of Economics is at one a practical necessity and a
normal obligation”.
Q5. Distinguish between micro-economics and macro-economic (Nov’03,
Nov’12).
Difference between Microeconomics and Macroeconomics:
Microeconomics
|
Macroeconomics
|
1. It is that branch of economics
which deals with the economic decision-making of individual economic agents
such as the producer, the consumer, etc
|
1. It is that branch of
economics which deals with aggregates and averages of the entire economy,
e.g., aggregate output, national income, aggregate savings and investment,
etc.
|
2. It takes into account
small components of the whole economy.
|
2. It takes into
consideration the economy of any country as a whole.
|
3. It deals with the price-determination
in case of individual products and factors of production.
|
3. It deals with general
price-level in any economy.
|
4. It is known as price
theory (since it explains the process of allocation of economic resources
along alternative lines of production on the basis of relative prices of
various goods and services).
|
4. It is also known as
the income theory (since it explains the changing levels of national income
in any economy during any particular time period).
|
5. It is concerned with
the optimisation goals of individual consumers and producers (e.g.,
individual consumers are utility-maximisers, while individual producers are
profit-maximisers).
|
5. It is concerned with
the optimisation of the growth process of the entire economy.
|
6. It studies the flow of
economic resources or factors of production from any individual owner of such
resources to any individual user of these resources, etc.
|
6. It studies the
circular flow of income and expenditure between different sectors of the economy
(say, between the firm sector and household sector).
|
7. Microeconomic theories
help us in formulating appropriate policies for resource allocation at the
firm level.
|
7. Macroeconomic theories
help us in formulating appropriate policies for controlling inflation (i.e.,
rising price-level), unemployment, etc.
|
8. It takes into account
the aggregates over homogeneous or similar products (e.g., the supply of
steel in an economy).
|
8. It takes into account
the aggregates over heterogeneous or dissimilar products (say, the Gross
Domestic Product of any country during any year.
|
Q6. What are the main goals of
macro-economic policy (Dec’12)?
Macroeconomic goals: Three conditions of the mixed
economy that are most important for macroeconomics, including full employment,
stability, and economic growth, that are generally desired by society and
pursued by governments through economic policies.
Macroeconomic
goals are three of the five economic goals of a mixed economy that are most
important to the study of macroeconomics. They are full employment, stability,
and economic growth.
Full Employment: Full employment is achieved when
all available resources (labour, capital, land, and entrepreneurship) are used
to produce goods and services. This goal is commonly indicated by the
employment of labour resources (measured by the unemployment rate). However,
all resources in the economy--labour, capital, land, and entrepreneurship--are
important to this goal. The economy benefits from full employment because
resources produce the goods that satisfy the wants and needs that lessen the
scarcity problem. If the resources are not employed, then they are not producing
and satisfaction is not achieved.
Stability: Stability is achieved by avoiding
or limiting fluctuations in production, employment, and prices. Stability seeks
to avoid the recessionary declines and inflationary expansions of business
cycles. This goal is indicated by month-to-month and year-to-year changes in
various economic measures, such as the inflation rate, the unemployment rate,
and the growth rate of production. If these remain unchanged, then stability is
at hand. Maintaining stability is beneficial because it means uncertainty and
disruptions in the economy are avoided. It means consumers and businesses can
safely pursue long-term consumption and production plans. Policies makers are
usually most concerned with price stability and the inflation rate.
Economic Growth: Economic growth is achieved by
increasing the economy's ability to produce goods and services. This goal is
best indicated by measuring the growth rate of production. If the economy
produces more goods this year than last, then it is growing. Economic growth is
also indicated by increases in the quantities of the resources--labour,
capital, land, and entrepreneurship--used to produce goods. With economic
growth, society gets more goods that can be used to satisfy more wants and
needs--people are better off; living standards rise; and scarcity is less of a
problem.
No comments:
Post a Comment