What is economics?

(IB and HKDSE)

As a human, there are certain things that we need just to be able to survive, such as the air we breathe, the food we eat, the water we drink, shelter from the elements, etc.  These are called needs, which we can easily be content with. Once we’ve had our share and satisfied our needs meter, we tend to stop using or consuming these things until it threatens our survival or bring about discomfort again.

On the other hand, there are also things that we don’t need, but desire.  These are called wants and they are things that make us happy, but not necessary for survival.

There is a common problem that every person in this world faces.  As a human, we are programmed with survival instincts, that is, we will do what we need to do to survive. After that however, after we are able to secure all of our needs, we start planting our seed of problems.  Once our needs have been satisfied, we are no longer self-controlling at the basic level, meaning, we will start to think “What should I do next?” “What do I want”.  Unfortunately, unlike needs which we are programmed to have a soft-limit for, we are never programmed to really deal with wants.  (Who would have that that the Human race was able to get past the caveman stage and actually find ways to tackle our necessity problems and end up living without having to worry about dying!)

Because we don’t have a soft-limit to wants, it pretty much becomes unlimited.  It’s pretty hard to stop your mind from thinking about or wishing to have what the other guy has or what you don’t have.  Because the products we buy or services we patronise require resources to produce or operate, such as raw material, workers, tools and machinery, and gifts form nature, we need to use them.  However as citizens of the Earth without the ability to travel to other planets, we have limited resources on this planet.

When the unlimited wants that humans have clash with the limited availability of resources that Mother Earth is able to provide us with, a third existence gets created, which is the phenomena of scarcity.

(Unlimited Wants + Limited Resources = Scarcity)

So long as we are unable to travel the stars in big spaceships, we will always be in the company of this situation.

We want things, many things. But when we have a limited amount of resource, we fundamentally need to make decisions and choices, since we naturally cannot have it all. We must choose to have some things, and give up on others.

So, how do they make these choices? What includes their decisions?

Welcome to Economics

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