Why Is Economics Important?

Photo Credit: https://www.effective-states.org/

The study of social science which is concerned with the manufacturing, issuance and utilization of goods or services is termed Economics. It involves the study of the business structures, administration, people who have made innovations in various fields, governments, and the process of allocation of the resources available.

Economics very nicely defines the practices and interrelations among the people related to economic fields, and their functioning. Economics may sound and appear as an easy term to study but it has deep roots. The subject of economics is further classified into mainstream economics and Macroeconomics. 

  • Mainstream economics – deals with analyzing the rudimentary components in the economy, counting the individual agents, markets, organizations, suppliers, purchasers, and clans. 
  • Macroeconomics –  deals with the study of manufacturing, fabrication, exhaustion, and incoming funding, and circumstances influencing it. Deploying labor resources as per demand, managing working capital, currency inflation, economic growth, land, and policies concerning common people are other such aspects that are covered in macroeconomics.      

Society plays an important role as economics is directly related to real estate, businesses spread across various sectors including pharmaceuticals, jewelry, information technology, aviation to name a few. It is also found to have a relation with diversified subjects such as crime, education, law, philosophy, politics, religion, and social institutions.

Apart from providing financial knowledge, the study of Economics makes people aware of how to tackle things in times of dearth. The decision-making capability is the most significant factor in determining the fate of the society in times of scantiness in supplies of the necessities required by the society. In the modern world, with the ever-increasing population, there are occasions very often seen where demand has surpassed the supplies. These deficiencies in supply can be in any form like the scarcity of natural resources, scarcity of raw materials, cultivable land, habitable land.

The undersupply, paucity, or scarcity of materials is well understood by the study of economics as it minutely scans every aspect with which the shortage has to be dealt with. The subject economics emphasizes the matter that the manufacturing process or the deployment of labor should be in such a manner that the tasks have to be allocated to various agencies and outsourced so that the maximum output could be achieved without burdening a single agency or a group of people. The terms teamwork and outsourcing are the byproducts of the study of economics. 

This process of Economics has been highly used globally by almost all industries and organizations. For example, we can take the hotel industry which has a staff comprising members having specialization done in distinct services like the chefs, head chefs, managers, unskilled kitchen helpers, servers to attend tables with customers and so on, here we observe that the duties have been well assigned to them in advance, and they know their role to play which would be beneficial for the hotel. Present times business models have the allocation of specific tasks to a specific category of people to provide fruitful results and further improve their work efficiency. 

The allotment of work and breaking up of labor among varied services to improve the outcome of the task is the main focus of the division of labor. This model is also applied in many other industries where a large scale of the labor force is to be used. Take the example of the Hospital industry which has numerous job classifications, right from the doctors to the nurses and unskilled laborers employed for the cleaning and maintenance of the hospital to name a few.

Dissension and Qualities of Labor

The industries today are focussed on producing goods or services which are new in the market and for providing such services they need a lot of man force, which includes skilled as well as unskilled workers. This is the time when they have to split up jobs and assign jobs well divided by observing their skills. Following this structure of the business, great profits can be obtained. It is observed that a person having specialization in a particular skill exceeds the target assigned to him as compared with people performing the same task with less experience and skills in that particular work. 

From the above instance, we come to understand that specialization plays a vital role in assigning tasks in the schedule of the working in an organization. Specialization permits workers to pivot on the basic details of the manufacturing process where they have an upper hand concerning work. Different people have expertise in different jobs, so it is favorable to assign jobs as per the staff’s skills, talent, and interests. The output of the work is directly related to educational choices, which affect work performance. Examples can be taken that only candidates having a degree in software engineering are eligible for posts in Multinational infotech firms. 

Be it any reason, it is discovered that what people are interested and skilled in and employed at that particular task has delivered a better output than people engaged in activities which are multitasking which involves them being good at some aspects and average at the others. 

People with qualifying the courses like management course stand a better chance. The specialization provides bigger and better outputs with great quality. Specialized people have a better understanding of their job, which results in the task being done early and in a better way. 

Specialization facilitates organizations to take advantage of economies of scale, in simpler terms it may be said that as the production increases the average cost of producing each product decreases. For example, if a company produces 1000 pens in a month it would be quite expensive comparing it with the manufacture of 10000 pens per month with the same available resources including manpower. 

The same goes with the manufacturing in the garment industry, a company fabricating 500 shirts in a month would incur more expenditure as compared to the same company manufacturing 5000 shirts in a particular month with the same available resources.

Here it is observed that the volume plays a key role in determining the profits made by the organization. It is noted that people with specialization in their services result in larger production of greater quality, which is beneficial for the society and the organization both. The dissension and qualities of labor have played a pivotal role in facing the shortage of products and services.

Commerce and Retail

The daily business involving sectors should be such that the basic needs of the employers should be fulfilled. iThe employers’ pay should be such that it facilitates them in buying the essential goods and services required. It could be mentioned that even specialization requires trade. It may not be required by a person to know everything about the clothing industry to buy shirts and trousers, he just needs to buy them to wear it or for end-use, similarly is the case with electronic devices like a mobile phone, just put in the sim card and start operating. You don’t need to know about the piston mechanism before owning a bike, you just ride on and enjoy it. Today’s economy has evolved in facilitating people to acquire goods by offering their services in which they have specialization. This does not mean that it is necessary for them to acquire entire knowledge about all the goods and services they use. However, they can attain specialization by doing an MBA course online.

Importance of Economics

  • Economics has a great impact on the organization’s business, and it impacts various industries. The economy consists of many ups and downs and its study helps in better understanding, the business model and how the industry works.
  • Economics helps in maintaining focus on the business and helps to seize the opportunities available in the market for better prospects. 
  • Sanitization facilities, availability of clean water for drinking, global warming are also the factors that are directly related to Economics.
  • Having a good understanding of economics helps in the overall development of an individual. It provides the knowledge to understand between what is beneficial and what is nonsensical.