The Application of Economics in Real LifeWe are all familiars with the term 'economics'. In loose words it is the study of wealth. You must study the basics of this subject in your school or high level or in your graduation as well; more detailed study in case if it is your honors. However, certain time the knowledge is limited only to the bookish part. We note down the definitions, work out sums and give our exams. It won't be wrong to say that most students are concerned about the marks and ranking. Very less importance is given on the actual learning part. Economics is a kind of subject which we get to see in our day to day life. Say the rise of price to unemployment problems, market deficits to fall in the value of rupee, and so on. We come across the terms of inflation, price hikes, devaluation, economics graph, migration and its hamper on the rural areas etc. in newspapers, magazines and online sites. The burning issues of the country, its relation and current affairs with other nations, trade in the international market, foreign market value of rupee, etc are the recent topics we can talk about.
However, it's sad on the part to say that we in spite of learning economics fail to examine these issues and its root causes. No doubt it is the concern of the government to curb the problem that is hindering the path of the country towards development and sadly it is still a developing country. India is a welfare and democratic state. We are rich in mineral resources, have a good geographical location and good human resource but despite that India is still lacking behind. We have the right to choose our government and participate in the political as well as economical activity of the nation directly or indirectly. Therefore, efforts from the citizen are also needed.
You may ask me now as how one can do anything or put an effort to add the contribution towards the welfare of the country. Indeed, we do our work as a citizen and that is enough but the real work doesn't end here. A responsible citizen is different from an actively responsible citizen. You are familiar with the issues and gossip with your mates as how this is finishing the nation. You know the issues and you take part in it responsibly to curb it. The difference is there. Secondly, the application of economics in real life. This may sound tough and tight or you may think of doing sums in a practical exams but it is not. Let me tell you the real meaning of a subject is not grasped until you apply it with own hands in your surroundings. Talking with the common things in our day to day life which are related to economics and how we can apply the economic laws here.
Starting with tax and fees, in simple words, a tax is a payment of share of our income we pay to government while fees can be extra charge the companies or firms pay in order to carry out their economic activities. Certain times we see that people are deprived with the payment of tax. Another term' black money' falls here which mean the money whose tax has not been paid duly to the government. Why one must pay his tax from time to time? The government runs on the revenues collected from the public and other sources like invested funds in other projects, countries, selling of bonds and other activities. If the government fails to collect to needed revenue than the investment of public sectors and welfare schemes is also lack behind. As simple as that. In economics we have studied about budget where the government makes as estimated enrollment of its funds on various sector like industrial, agricultural, health and education.
The collection of tax can be direct or indirect. Sales tax, income tax is kinds do direct tax we have to pay directly. While tax on commodities or any service will fall under indirect tax. We may wonder when we go to any restaurant or shopping mall, why we pay extra amount of charges on the bill. These are income tax of the mall which they have to pay to then government and to collect that, they charge us. So it is an indirect method where we are paying a share of our income to the government. Therefore, for the smooth running of the economy this cycle of collection of revenue and investment will go on. Thus, payment of tax is an area where we apply the rules of economy of a condition for a welfare country.
One of most familiar issue is the demand and supply of a commodity or a service. Why is that sometimes the prices of goods rises and other times it is cheap and abundance in the market? One main reason and law we studied in economic is 'demand rises with the price' where the demand curve has an upward slope from left to right. The continuous demand for a good sometimes fails to provide equal distribution to such a large population. Also, underproduction of commodities due to financial or weather issues is also to be noted. Illegal stocks of commodes like LPGs during the havoc add another trouble to the people. What we need to understand that this is a burning problem of the nation where much care from the side of the government is needed. However, we as the public must not encourage the black marketing which in fact is added to the category of back money.
Another very familiar term is the diminishing marginal utility. It states that with each increasing intake or use of a good, its marginal utility declines. An example of this in our day to day life is food. For example- when we keep on eating an item, we slowly loose the taste and feel annoyed. This is because its utility level is declining directly in proportion to its intake.
Budget making is another place where we apply the theory of 'unlimited wants but limited resources' or 'human wants are unlimited'. While framing a budget we try to adjust all our wants with the limited resource i.e. money in our hand. We behave like a rational customer and purchase those things which are most needed like food, clothing while comfort goods are kept back. We also use the term of alternatives where we seek the best with our limited money in the perfect competition market.
We are all in fact surrounded by the micro as well as macro elements of economics in our practical day to day life. Starting from an income source to the purchase of a good, making a budget to demanding for a good. This is a world of knowing the correct outcome. Apart from rationally and critically amassing the factors and issues, we also need to know the point of the definitions and its systematic use in the economics activities.