ECONOMICS

Adang Prianto

Economics is a phrase that is often used in everyday life. At all media, this word is frequently used and
always has a special news headlines such as production of domestic commodities, export and import,
currency exchange, unemployment problem, lack of food supply in some country and so on. Almost all
of people ever heard about economics and may know what kind of subject is it, even so, each of them
probably has their own way of describing the economy. In this essay, I will express my view and
understanding about what economics is and how it may be used in my future career or daily life.
Although many people may familiar with economics, people still have difficulty in defining the subject.
Even in fact, there is no precise definition agreed upon by the experts, there are many definitions
proposed by experts based on their own point of view. This dissimilarity is mainly because that
economics is one of the youngest sciences known to man (Callahan, 2004, p.18), and may also because
there are no economic truths that apply to all men in all times and places (Callahan, 2004, p.21).
In the nineteenth-century, economist Alfred Marshall defined economics as a study of mankind in the
ordinary business of life (Krugman, 2013, p.1). This definition is actually valid for most of economic
activities around the world. Its represents an ordinary market, which sells hundreds of ordinary items
that billions people of the world can and do purchase every day, and surely not luxury goods that only
the rich can afford. In defining economics, some economist also associates it with how society manages
its scarce resources. With limited resources, a society cannot produce all requested items and services
(Mankiw, 2011, p.4). According to this definition, decision is the most important aspect when dealing
with scarce resource, thus at a time society can only decide which item or service that will produce,
who will do that particular job, and allocated for what particular purpose.
Paul A. Samuelson explains economics based on two important factors: scarce resource and how to use
it efficiently. He defines economics as the study of how societies use scarce resources to produce
valuable goods and services and distribute them among different individuals (Samuelson, 2001, p.4).
Although this definition has a similar concept to what Mankiw proposed, it is more clearly explained
on how societies exactly do. It also implies that as a consequence of limited resource, society have to
efficiently use it in terms of production and distribution.
By understanding the different concepts and definitions of economics as it has been expressed by
experts, the following examples will demonstrate how economics can be used in my daily life and in
my future career.
First application which comes up in my mind is how to be aware in resources that we used in our lives.
It is very important because there are a lot of scarce resources that is beyond our control, we only are
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able to utilize it without having the power to change or create it. In my opinion, the most important and
common scarce resource encountered by people in daily life is time, it prevents people to be in the
different works and different places at the same time slot. People must decide what will they do and
where they should be. For instance, I can go study at the university today at 9 a.m., therefore I cant go
work at a factory at the same time, and similarly if I want to go work at 10 a.m. then I should leave the
university, I cant stay while going to somewhere else. Time, although it is the scarcest resource
available to man, it practically often mistreated. It said so because one of the most important
consideration of using a scarce resource is efficiency, and we are aware that many people do not treat
it properly by just doing useless things frequently. I am studying engineering at the moment, then from
my point of view how we act efficiently in the context of time is a challenge, people surely cant do
multiple work together, however getting the information as much as possible at the same time slot is
something that we can achieve using technology (Weinman, 2011). For me realizing the importance of
economics concepts, especially in the context of scarcity of the time is a good learning to start
prioritizing activities or tasks, and setting time period to accomplish every task.
Another example of the economics application is that people face trade-off. Nothing is free in this
world, probably this phrase is quite popular, its mean that when we choose something, we shall
sacrifice something else (Wessels, 2000). This can be a sacrifice of time, money, or whatever resource
we currently have. In one of my case, deciding to enter higher education in Master Degree could mean
sacrificing the opportunity to work with a decent salary, or opportunity of creating a profitable business,
but by choosing the higher degree I am very confident that I will get more benefit after graduated, in
terms of getting higher salary or more reliable business. Opportunity cost, which is a lost opportunity
in order to run an option, is the concept that is often overlooked. The price I had to pay for master degree
is not just the cost of tuition, books and living expenses only. The opportunity costs incurred as a result
of losing the opportunity to do something else should come into consideration. Sometimes, cost of the
opportunity to go to college can considered be very high. Therefore, worthiness of every decision
depends on the current condition of each individual, does not rely on others preferences and constraints
(Grossbard, 2015).
Furthermore, after entering the university, I have to face a lot of trade-off again, for example, with
limited money I have at the moment, I have to decide whether buying textbooks or laptop for supporting
my study. At this rate I choose a laptop because there are so many relevant books or sources available
on the internet that can be downloaded for free. Laptop also has multiple functions, it helps me doing
my assignments and some of engineering simulations which is truly crucial for an engineering student,
and hence on my circumstance choosing to spend money for a laptop is more effective and more
efficient rather than books. As an international student, I also have problem closely associated with the
housing. Many factors I should consider before renting a house in order to get the most efficient option.
I probably select a cheap rent rate, but usually located a far from the campus, which means I have to
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incur additional costs for transportation and the time lost during the trip. Another option is renting a
house near campus, which usually at a higher rate, but I dont need to incur any additional costs, and
surely save time. Every student certainly possesses their own preference, yet in my point of view, the
second option is better since I consider the time as the scarcest resource and I should utilize it as much
as I can do. Although we have our own preferences, we often dont have any choice when facing with
lack of available housing, it is because there are also governments policies which regulate the allocation
of housing in the market, thus demand and supply can stand on the desired equilibrium (Arnott, 2015).
Another economics idea I learned is the conception that people respond to incentives. Knowledge of
incentives and people's reactions to these incentives are very important to know the work and
movements of the market. People will usually be more "active" when they get the additional advantage
of what they are doing. For example, if someday I run the business and expect to increase my companys
productivity, the first and most efficient way for me to achieve the goal is by giving incentives to the
employee. It driven by the assumption that the employee will work regularly in the absence of additional
income, but when there is an incentive applied to them, they will work extra than before in terms of
quality and quantity. Thus, companys productivity will automatically increase without recruiting more
workers or adding new equipment. In the other hand, my company can also choose to add production
equipment and give incentives to the customers by discounted price of the products. This method uses
a different approach by spending capital to cut down the production cost and following basic term that
whenever the price go down, the demand will increase, and hence companys productivity also
increasing. It is consistent with the concept introduced by Thomas Sowell that Prices are at the heart
of these incentives in a market economy (Sowell, 2011, p.11)
Eventually, in conclusion, the most suitable definition of economics for me is which proposed by Paul
A. Samuelson which describe economics as the study of how societies use scarce resources to produce
valuable goods and services and distribute them among different individuals (Samuelson, 2001, p.4).
Since this definition is very comprehensive, it does not restrict to material well-being or money measure
as a limiting factor, but it considers economic growth over time. Also, understanding the application of
economics in daily life and future career provides me a strong foundation in making decisions when
confronted with personal or social choices.

References
Arnott, R. (2015). Housing Economics. International Encyclopedia of the Social & Behavioral Sciences
(Second Edition), 239-245. doi:10.1016/B978-0-08-097086-8.71049-X
Callahan, G. (2004). Economics for Real People (Second Edition). Alabama: Ludwig Von Mises
Institute.
Gans, J., King, S., Stonecash, R., Byford, M., Libich, J., and Mankiw, N. (2015). Principles of
Economics (Sixth Edition). Boston, MA: Cengage Learning.
Grossbard, S. (2015). Household Economics. International Encyclopedia of the Social & Behavioral
Sciences (Second Edition), 224227. doi:10.1016/B978-0-08-097086-8.94008-X
Krugman, P., Wells, R. (2013) Economics. New York: Worth Publishers.
Mankiw, G. (2011). Principles of Economics (6th Edition). Boston, MA: Cengage Learning.
Samuelson, Paul A., Nordhaus, William D. (2001). Economics (17th Edition). New York: McGrawHill/Irwin.
Sowell, T., (2011). Basic Economics A Common Sense Guide to the Economy (4th Edition). New
York: Basic Books.
Weinman, J., (2011). Time is Money: The Value of On-Demand. Retrieved from
http://www.JoeWeinman.com/Resources/Joe_Weinman_Time_Is_Money.pdf
Wessels, W.J., (2000) Economics Business Review Book (Third Edition).USA: Barrons Educational
Series.