ECONOMICS IS ABOUT SCARCITY AND CHOICE

Economics is about Scarcity and Choice

Economics is about Scarcity and Choice

Introduction

Economics is the social science of making sufficient choices or decisions and studies how people interact in their society in an economic way. The first chapter introduces the subject of economics and unfolds what it is all about.

We live in a society where economics is a valuable need in order for us to understand and handle any problems that maybe occur in the future. The basic economic problem is scarcity ; where people's wants and needs are unlimited, while the resources needed to produce goods and services to meet these wants and needs are limited.(Beale,2000)

Discussion

Every time a need is satisfied a new need is then created thus, creates the unlimited wants and needs of the human characteristic. The problem of scarcity results in allocation which is the process of choosing which needs will be gratified and how much resources we will use in order to satisfy them. Because there is so much wants waiting to be satisfied there is only so much resources to fulfill those wants. Limited resources is the condition of there not being enough resources to fulfill all wants and needs.(Anderson,2003)

Since economics is all about making choices people must understand the cost and benefits of any given choice in order to make competent choices .Opportunity cost and Opportunity benefits guide the decisions process of individuals and countries and determine the goods to which they are going to be produced to. However, Opportunity cost is the option that you must give up when you make a choice and opportunity benefit is what you gain by making a certain decision. An example of opportunity cost and opportunity benefit is assume one night you have a stack of homework waiting for you to do but when your parents get home they demand that you go out with them to eat dinner and catch a flick afterwards. Yet you really want to do your homework and study but you give up your education time to spend the night with your parents. Your opportunity cost of this is what you give up and that is your study time however, you do gain a benefit from giving up your homework and that is a movie and a casual dinner with your parents.

Every society has basic economic questions and when responding to these questions societies must balance the needs of individuals with the needs of society together. The three basic economic questions are : What will be produced? How will the goods be produced? And for whom will the goods be produced to? These three basic questions are used by all societies to make economic decisions. The subject Economics is divided into two separate branches : microeconomics which examines the choices of individuals regarding one product , one firm or one industry , and macroeconomics examines the conduct of the whole economy at once.(Beale,2000)

Everything in life has a theory, in economics the importance of theory is a simplified description of ...