10 Basic Uses of Economics
The American Economic Association states that economics includes "...the study of labor, land, and investments, of money, income, and production, and of taxes and government expenditures." Economics is about how people, organizations and countries acquire and use resources. It is both a science and philosophy, as it is difficult to measure the effectiveness of an economic plan; it's rare to be able to apply a plan and not have it influenced by the world around it in ways the plan's creators didn't account for.
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Governments
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Governments influence economies in many ways 1. Governments use economics to budget. Governments must pay wages and rents, acquire goods and pay debts. Income should be equal to expenditures but, like individuals and companies, governments can spend more than they take in.
2. Governments use economics to plan taxation. By deciding what parts of their population to tax -- businesses of different types, citizens of different wealth -- and how to tax them, they can encourage or discourage change in how money is spent and moved.
3. Governments use economics to plan regulation. Regulations influence what kinds of business flourish.
4. Governments use economics to plan how to manage trade with other governments. Cities, states and countries help the movement of goods and services or impede it in ways that are economically beneficial for the people they govern.
Business
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Businesses use economics to plan and support products 5. Businesses use economics to plan the acquisition and management of resources. Whether it is people, raw materials or manufactured goods, companies need to know how much they need and when.
6. Businesses use economics to plan new-product launches. Business leaders must understand whether a product they wish to introduce is viable: Will the new product be purchased? Is the target market capable of meeting the price? Can the product be produced in such way as to meet a predefined cost?
7. Businesses use economics to support production of existing products. They need to understand how long customers will continue to support a product and whether the cost of producing the product can be reduced.
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Individuals
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People use economics to plan their lives 8. Individuals use economics to plan day-to-day budgets; how much is coming in should match what is going out.
9. Individuals use economics to plan their futures. Retirement takes life-long planning and commitment to ensuring adequate resources are in place for support in old age.
Justification
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10. Economics are used to justify many things. Governments, businesses and people use economics to adjust what they do in the moment and the future. Fundamental moral questions are entwined with economics. For instance, should the rights of the many be trampled by the needs of the few, or should the few be sacrificed to support the majority? Deng Xiaoping, the leader of Communist China justified moving his country to capitalism through economics, saying, "i\It does not matter what color a cat is as long as it hunts mice."
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References
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