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How can economics help me make better decisions?

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Michael Koren eNotes educator | Certified Educator

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The study of economics may help you make better decisions. As with most things, the more informed a person is, the greater the chance that wise decisions will be made. If you study economics, you will learn how supply and demand affect things such as price, wages, and the availability of goods. If you know that certain products that you use and need will be lower in price at certain times of the year, you can wait to make your purchases until that time. For example, Southwest Airlines is known to have their best sales in June and in October. If you can make reservations during those three-day sale periods in those months, you will save money. Buying winter clothes as the winter season is ending may lead to lower prices for that kind of clothing. If you know what job fields are in need of workers, you might be able to increase your chances of getting a job and getting a higher-paying job if you enter that job field.

A study of economics will help you understand how our money system works. This may help you maximize your income. If you understand the principles of compound interest, your money will grow faster than with simple interest or no interest. If you understand the principles of the stock market, you might make wise investment decisions. If you understand how credit works, you might be able to avoid debt or keep the debt payments low. If you understand how to make a budget and stick to it, you may be more able to avoid debt. Economics will teach how to analyze the costs and benefits of any decision you have to make.

Economic issues impact us every day. If you understand various economic principles, you may be able to save money, have an increased income, and improve your overall financial picture.

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Inuk Lee eNotes educator | Certified Educator

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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 eNotes educator | Certified Educator

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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.

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krishna-agrawala | Student

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.