Why does everyone need to understand economics?
What is its importance?
Our discipline has two important features. First, we develop conceptual models of behavior to predict responses to changes in policy and market conditions. Second, we use rigorous statistical analysis to investigate these changes.
Economic literacy certainly contributes to the first class of knowledge. People like to think and talk about the economic issues that affect them as consumers, workers, producers, investors, citizens and in other roles they assume over a lifetime.
Economic literacy also gives people the tools for understanding their economic world and how to interpret events that will either directly or indirectly affect them.
Nations benefit from having an economically literate population because it improves the public's ability to comprehend and evaluate critical issues. This understanding is especially important in democracies that rely on the active support and involvement of its citizens.
What is Economics?
Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.
Behind this definition are two key ideas in economics: that goods are scarce and that society must use its resources efficiently. Indeed, economics is an important subject because of the fact of scarcity and the desire for efficiency.
How does economic freedom empowers and uplifts the people of the world?
It influences all aspect of a man’s life and his environment. When you live in a nation with a high level of economic freedom, it means you will earn higher income or pay, revenues and salaries.
There is high reduction in unemployment rate, reduces hardship, brings about higher life expectancies and a conducive atmosphere to operate and live in. It brings about increase in the level of food security and security of individual life and properties.
For example, United states ranking in top ten of the countries with the highest economic freedom has reached the GDP of 20 trillion dollars by 2018.
GDP is a monetary measure of the market value of all the final goods and services produced in a period of time, often yearly or quarterly. The economic freedom of the country supports its entrepreneurial culture and its entrepreneurs.
Core principles of Economics
Our choices involve costs
We respond to incentives in predictable ways
We create economic systems that influence individual choices and incentives
People gain when they trade voluntarily
People’s choices have consequences that lie in the future.
Basic Economic Problem
When it comes to the basis of economic problems we land upon...........
Scarcity is fewer resources than are needed to fill human wants and needs.
These resources can be resources that come from the land, labor resources or capital resources. Scarcity is considered a basic economic problem.
There is a finite limit to the amount of natural resources available for production, such as land and fossil fuels.
Labour is limited by population size, labour market skills and the willingness of the population to work.
Capital is limited by the extent to which private individuals and firms, as well as governments, are willing to invest in capital, as well as the level of savings available for investment.
The supply of entrepreneurial skill is limited by the size of the population, and the willingness of individuals to innovate and take risks.Opportunity cost
Trade offsIn economics, the term trade-off is often expressed as an opportunity cost, which is the most preferred possible alternative. A trade-off involves a sacrifice that must be made to get a certain product or experience. A person gives up the opportunity to buy 'good B,' because they want to buy 'good A' instead. For a person going to a baseball game, their economic trade-off is the money and time spent at the ballpark, as compared to the alternative of watching the game at home and saving their money, plus the time spent driving to the ball game.
Real life example would be the Famous Brexit.
Brexit is the impending withdrawal of the United Kingdom from the European Union. In a referendum on 23 June 2016 a majority of British voters supported leaving the EU. For leaving the EU they now had more independence.