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Text 4. WHY STUDY ECONOMICS?

A basic understanding of economics is essential if we are to be well-informed citizens. Most of today's political problems have important economic aspects: How important is it that we balance the budget? How can we make the social security retirement programmed financially secure? Why do we continue to have large international trade deficits? How can we best reduce pollution? What must we do to keep inflation in check? What can be done to boost the country's productivity and economic growth? Are existing welfare programmers effective and justifiable? Do we need to reform our tax system? How should we respond to growing market dominance by a few firms in some sectors of the economy?

As voters, we can influence the decisions of our elected officials in responding to such questions. But intelligence at the polls requires a basic working knowledge of economics. And a sound grasp of economics is even more helpful to the politicians themselves.

Economics lays great stress on precise, systematic analysis. Thus, studying economics invariably helps students improve their analytical skills, which are in great demand in the workplace. Also, the study of economics helps us make sense of the everyday activity we observe around us. How is it that so many different people, in so many different places, doing so many different things, produce exactly the goods and services we want to buy? Economics provides an answer. Economics is also vital to business. An understanding of the basics of economic decision-making and the operation of the economic system enables business managers and executives to increase profit. The executive who understands when to use new technology, when to merge with another firm, when to expand employment, and so on, will outperform the executive who is less deft at such decision-making. The manager who understands the causes and consequences of recessions – downturns in the overall economy – can make more intelligent business decisions during these periods.

Economics helps consumers and workers make better buying and employment decisions. How can you spend your limited money income to maximize your satisfaction? How can you hedge against the reduction in the dollar's purchasing power that accompanies inflation? Is it more economical to buy or lease a car? Should you use a credit card or pay cash? Which occupations pay well; which are most immune to unemployment? Similarly, an understanding of economics makes for better financial decisions.