What Is Economics
What Is Economics
What is economics?
How would we able to define economics? There are many ways of defining economics but the easiest way to put economics is by the way in which money influences, or is organized within an area of business in our society today. With this we ask ourselves can we afford this or not? Everything ultimately ends up to the limitations of our time, the income we earn, and the prices we must pay to enjoy these things. There are many reasons why we have these limitations but to sum up all these in two words are scarcity and incentives.
We can break these two situations in to two, scarcity and incentives. Our ability to not able to truly satisfy our wants are called scarcity. All people face scarcity whether it be the rich or the poor. When we face scarcity or shortages we must choose amongst the choices and options we are given, or in other words alternatives. We must choose whether we want either choice A or choice B. But amongst these alternatives we have an incentive, and this incentive is the choice we make between the two choices we are given. To give you an example of a simple life situation is this: You want both a pen and a pencil but when the price to one of the choices drops, the new price attracts you to the cheaper of the two.
All of our choices in our everyday situations are tradeoffs, and these choices end up deciding what, how, and for whom goods and services get produced for. There are four categories to these tradeoffs; land, labor, capital and entrepreneurship. All of these categories are relied on each other, from quality, machinery, ideas, and natural resources. In economics we call these what, how, and for whom. With this in mind we now get to the question will this be the best choice for my self-interest or for the social interest?
Everyday we face these two types of situations. To the best of our knowledge we make our daily decisions on the foundations of our current resources and time we have, which makes most sense to us at that time being. We don’t come to our decisions thinking of the other person but what makes the best sense to our opportunity at the time. But after deciding on what we decided, was it for the best of my self-interest or the social interest? These social interests are what the society as a whole thinks is the best choice. There are no true answers to these two. For centuries economists have been trying to find the answers to these questions. But there is no true right or wrong answer.
So now from this we can come back to the choices and tradeoffs we face. Our choices are made because we face scarcity, and our selections are from our substitutes. Its like saying I could of chose this but I chose that over the other, but never both. And these choices we make are what we call tradeoffs as mentioned earlier. We can also call this tradeoff as an exchange for choice A for choice B. In example more outdoors for less work (income) or more work (income) over less outdoor time. These choices can change the whole outcome of what we traded off.
All these choices we make have a cost and a cause and affect to the society and the economy. A simple and easy way to picture this is your income. How much we should spend and how much we should save. So saying this we can imagine it as you save money for a vacation but you lose alternatives such as being able to invest your money into something else or using it for your own pleasure. Or in the other hand you don’t use your savings for your vacation, now you have the money to invest and to make your company larger.
All choices are tradeoffs. This idea insists that in order for us to obtain something we must give up something at the same time. What we give up for the alternative choice is opportunity cost. This opportunity cost is the result of what we think is of