Write an essay on The importance of art and science of economic analysis.
Essay: The importance of art and science of economic analysis
Economic analysis is a way to analyze the strengths and weaknesses of an economy. For understanding the exact condition of an economy; this is done. As per the art of economic analysis, it is assumed that the people in the economy are motivated by self-interest. They make those choices that make them better, and these are regarded as rational decisions. People do not make decisions to buy all the things or none of the things. Decisions of consumers are dependent on the marginal benefits and marginal costs. The buying behavior of people changes when their marginal benefits from consumption of a product exceed the marginal costs (Harcourt, 1997). The consumers are rational, and they collect a lot of information from different sources before taking any decision. But this is done till the marginal benefit keeps on exceeding the marginal cost. The resources in the economy are scarce (Wilson, 2014). They have to be deployed carefully as they are limited too and they get exhausted if they are not used properly. So an economic analysis helps in determining that how much resources needs to be put in a particular economic activity like for construction, how much land is required, what is the cost, will the construction be able to give as many returns as expected or will be land be wasted after construction. The analysis is important so that the inputs are used in an effective manner. With the analysis, it can be determined that how much of the labor, capital will be required to do some activity, what will be the cost of using them and how much return will be earned with the use of these inputs. The development of entrepreneurs also depends on the fact that how they do the economic analysis as the external environment of the business affects the working of a business and the fluctuations in the economy also impacts the decisions of the company. Economic analysis is a science as it uses the principles and theories that are already established and applies it in the day to day working of the economy and its activities. All the business and economic activities work on the basis of how well the analysis has been done.
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Wilson, C. (2014). Economic Analysis and Policy moves forward. Economic Analysis And Policy, 44(1), 1-2. http://dx.doi.org/10.1016/j.eap.2014.03.001
Harcourt, G. (1997). Economic Theory and Economic Policy: Two Views. Economic Analysis And Policy, 27(2), 113-130. http://dx.doi.org/10.1016/s0313-5926(97)50015-4