Economics is a subject which works ninety nine percent in our daily life. The Department the o Economics at the University of Ghana has the slogan on their badge “Economics is life” and that is absolutely true because biblically, it is stated anyone will account for his or her time and resources ones possessed on judgement day. Economics is from a Latin words which means Steward of resources. The ancient economists during the scope of the course came up with three economics units that is areas where economics affects and these are individual (household), firm and government. The following under listed are some points view how economics influence our daily routines.
The course has influence our daily life to how to use the scarce resources to satisfy human unlimited wants. To this, the problems of scarcity, opportunity cost, scale of preference and choice become practical in our daily life. The problems help individual, firms and government to maximize utility, minimize displeasure and maintain economic growth, development and stability respectively.
Economics helps individual and firms to react to economic situation like price changes regarding to demand and supply. There is always a shift in demand and supply as price changes which can be negative or positive. Normally demand equates to individuals and supply also relates to firms. The concept of demand states that “all other things being equal, the higher the price of the commodity in question, the lower the quantity demanded and the lower the price of the commodity the higher the quantity demanded”. This means that, any rational consumer who wants to maximize satisfaction will purchase more of commodities who price is low except for inferior goods and purchase less when price is high with the exception for societal ostentation. To demand, when price changes the results is most at time negative as it has been stated previously.
The concept of supply is the reverse of the demand law and it says that “all other things being equal, as price increases, producers produce more and vice versa”. Reality, rational producers, produce more of a commodity when its price rise to earn profit and produce less or zero when price falls drastically to avoid loss.
Again, economics has influence the business sector of how to divert or allocate their scarce means, by this the traditional functions of economic system and these are; what to produce, when to produce, how to produce, how much to produce and to whom to be produce. What to produce is the foundation of all the traditional functions and it means what commodities can the scarce resources use to satisfy the nation or individual unlimited wants. Firms always abide by this so their products would not be white elephant in the eyes of the consumers.
When to produce, this details the time that firms should produce particular commodities to suit to the interest of consumers. For instance, before and during Christmas, rational producers or manufacturers who produce Christmas related commodities shift their scarce and limited resources to produce Christmas goods. After the event, no rational Christmas producer would like to produce because the determinate of taste and fashion has pass out.
How to produce, before production to commence, the decision of how to produce come to mind. Here the firm should produce on human intensive that is, use more human efforts than machinery or capital intensive that is, use more machinery than human efforts.
Relating the content to revenue generation and this will be discuss on two economics units the firm and the government. Revenue is define as the amount of money or income ones receives from taking part in economic activities. All governments globally aim at how to generate revenue to run its economy. There are several means any government use base on the economic system to get revenue and some are, taxation, fine, sale of state properties, royalties, borrowing either from individual or international bodies or government like USA, International Monetary Fund, World Bank etc.
When borrowing, government always try to borrow from bodies with low interest rate to shun perennial deficit balance of payment.
Demand for some goods are fairly elastic while others are fairly inelastic. Fairly elastic demand is when a proportionate change in price results in a more than proportionate change in quantity demanded while fairly inelastic demand is when proportionate change in price leads to a less than proportionate change in quantity demanded. In reality, most government invest in goods whose demand is fairly inelastic like salt because as price rise quantity demanded would be less but increase revenue than fairly elastic goods.
Economists had classify profit into three categories namely supernormal, subnormal and break even. Firms consider these three profit in their daily routine and increase production when earning supernormal profit. Supernormal profit occurs when the marginal revenue curve lies above the marginal cost curve.
The theory of paradox value state that how some commodities are essential (man can’t do away from them but have less price than those that man can do away but have high price. For instance, water and gold. Water is vital in our daily life but it has less price because it is abundance in supply. As compare to gold, it is scarce in supply due to that is has higher price as to some abundance goods.
The above stated reasons and many more views as l stated at the beginning nit works ninety nine percent of our daily are why economics influence our daily life.