Economics in Daily life

Economics, the shorter name of economic science is a branch of social science which studies the behaviour of an economy in terms of production, supply and consumption. Lional Robbins defined Economics as “a science which studies human behaviour as a relationship between ends and means which have alternative uses”. The name “Economics” has derived from the ancient Greek word “Oikonomia”, which means household management. The name and definition itself clearly mention that it has a close relation with the daily life of a common man.

Let’s go through some economic policies and principles which has effect in our routine. In our everyday life we have to take decisions on purchase, like, how much to purchase different commodities. The essence of economics is the maximisation of human needs with limited resources. As we, the consumers are expected to behave rationally we wish to have maximum satisfaction while purchasing any product or service. Economic theories like Total and Marginal utility enables them to measure the utilities of particular product or service.

“Law of demand” says while the other determinants holding constant, the price and demand are in an inverse relation which has tremendous impact in our purchase behaviour. As we expect satisfaction in the cheapest way, always prefer the alternate option when something get more expensive, which is “Substitution effect”. Low-income groups are usually gone before the “inferior goods”, which do not have much substitutes. And they spend their significant portion of their income to purchase this kind of product which is termed as “Giffen paradox”. The utility of a commodity will go diminishes after continuous consumption of successive units throughout a particular period of time is the basic behaviour of a consumer, which is exactly called Law of diminishing marginal utility. 'Inflation', the situation where the decreased purchasing power of money as a result of rise in prices, have great impact in an ordinary human life.

Nowadays we can’t think of a single day without any banking transaction. Most of the banking policies are derived from the economics principles. Important policies regarding credit, like Bank Rate Policy (BRP), Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), are the main part of economics. In case of business firms, it has emerged as "Managerial Economics", a branch of economics, which has wide application in the decision making and forward planning for the efficient attainment of specific goals. Now managerial economics has grown into a branch of study which is broader in nature because it helps both management and consumer for satisfying their need.

From the beginning, we have discussed different areas which has close relation with daily life. In short, undoubtedly, we can say that economics is one of the studies which helps a human to make their life easier. The world would have been a dessert if not for economics. Economics is the mantra for expansion and growth.

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Prepared by

Veena Vinod

Faculty

Kairos Institute, Ernakulam