Economics is the study of the choices that individuals, businesses, and government entities make when allocating limited resources among alternative uses. For example, individuals must choose what goods or services to purchase with their limited incomes. Business firms must decide which goods to produce, how much to produce, and what methods to use. Government bodies must choose which programs to implement and which taxes to levy.
Economists develop theories to explain how aspects of the economy operate.
From theories, statistical evidence, and experience, economists predict how different economic entities will respond to various economic situations. These predictions help guide appropriate actions or policies. Economics knowledge is an important element in a liberal arts education. It helps individuals to develop informed opinions on many public issues as well as to make effective personal decisions. Economics knowledge in business and government can lead to better decisions and more effective policies.