How can economics help me make better decisions?

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readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted on

Economics can also help you see things from the point of view of supply and demand. If you are seeking to buy something like an apartment, but there are tons of apartments and very little demand, then you probably should not buy one or at least get it at a reduced rate. Now on the other hand, if you are able to get an apartment at a good price and the demand is great with little supply, then you probably should get it. This principle can apply to many different areas. In short, you want to have things that are not easy to obtain. So, if you have a medical degree, you have something than many other people do not have. This fact alone make your postion stronger.

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

It is not clear that economics CAN help you make better decisions.  However, if it can, here's how it would:

Economics teaches us to choose our behaviors through cost-benefit analyses.  If we follow this way of thinking, we will carefully consider whether the benefit we can expect from our action will outweigh the costs associated with it.

Therefore, it seems likely that using the economic way of thinking could encourage you to make more informed and well thought-out decisions rather than just going with your gut instinct or what you feel like doing at a given time.

Of course, it's not always easy to know what the costs and benefits of your actions will be so it's not always possible to make decisions in this way.

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Economics does not offer any practical methods or techniques for making specific decision matters like buying and selling, deciding levels of production capacities and quantities, or investments for individual firms. But it does offer then useful insights in to various aspects of prices, costs, utility and productivity that improve their overall understanding of the forces and factors that influence the outcome of this decisions. In this way knowledge of economics helps individuals and firms to improve the quality of their many decisions.

However economics offers many useful insights on the collective behavior of people and economies to help governments and other organizations concerned with behavior and performance of economies as a whole. Thus governments and other organizations use knowledge and methods of economics in a more direct way to take decisions on fiscal policies, taxation rates, and other economic regulations.

Economic analysis is also used bu companies that are affected by behavior of economies as a whole. For example, a big company dealing in foreign exchange business is likely to use economic analysis to understand and predict nature of foreign exchange rate fluctuations. Similarly big companies may depend substantially on economic analysis to identify business prospects in future, and take decisions on expansion and diversification based on that.

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