What is economics?

Boiled down to its essence, economics is a science that investigates the choices people, businesses and governments are forced to make because of a fundamental truth: resources are scarce. In the Department of Economics at Western Michigan University, we realize that this might seem boring and irrelevant at first, until you think about all of the situations in which scarcity forces choices such as:

  • Government decisions. When a government decides whether to fight a war, there are two main costs: the loss of human life and what else could have been done with those tax revenues, debt or both?
  • Money. For most people there is never enough. In economics you will be taught to approach the question of choice: Will the consumer buy more or less and why?
  • Time. There are only 24 hours in each day. Every day you make dozens of choices on how to use your time, giving up the opportunity to do something else because time is scarce.
  • Trade. What is it about trade in business that makes it so desirable? Is there a downside to trade?

To explore this all further, take econ classes! But remember that economics is a science and it will take hard work and practice to fully appreciate what it has to offer.

Why study economics?

Studying economics can be both useful and enjoyable. While studying economics, you will need to manage your time and priorities.

  • Economics is analytical, and developing solid problem-solving skills is essential for success. Thinking critically, solving problems and managing time and priorities are essential skills that employers look for in college graduates. You will need to think critically in order to evaluate questions like:
    • Should our government promote free trade?
    • What are the positive and negative aspects of free trade?
  • Economics is relevant. In learning economics, you will develop the tools to analyze such questions as:
    • If you start a business but do not pay yourself a salary, does that mean your labor is free?
    • If your business makes a profit, have you done well?
  • Economics can be surprising. For instance:
    • What justifies the salaries of ball players who make millions of dollars per year and are often described as excessive and outrageous?
    • Why would the owners of those teams voluntarily agree to pay those salaries?
    Answering these questions involves the use of marginal analysis, one of the most important tools in economics. Marginal analysis is used to get a lot of surprising answers and is broadly applicable both in business and in everyday life.
  • Economics can be profitable. Let's say one year ago you purchased a common stock whose price fell 10 percent over the course of the year.
    • Should you hang onto the stock until you recover your loss? 
    • To savvy investors (many of whom are well-trained in economics and know the concept of a "sunk cost"), the prior year's loss is irrelevant to the current investment decision. The relevant question is: Is there another investment out there that is better to which I should switch?

If you come to class with an open mind, listen carefully and work diligently, economics can be a richly rewarding subject.