An introduction to Economics
Ever wondered why you couldn't always have what you wanted? All the money in the world? The biggest house in the neighbourhood? Because everything comes at a price. Why the price, you may ask. Simply put, there are not enough resources on this earth that everyone can have what they desire. This is one of the fundamental basis of economics.
Economics. The term was first derived from the greek expression oikon nemein which can be roughly translated as “the one who manages the household matters”. By certain extension, this would then refer to careful management of the scarce resources society has.1
1 Ellie Tragakes, Economics and the study of Value, 2008
The issue of scarcity is not one that is new to economists. Therefore, they have centred many economic principles around it. The three basic economic questions include: what items are to be produced? Is it hot to produce said items? And for whom should it be produced?
The first question addresses which goods do individual economies place great value upon and choose to produce. This could be tailored to the certain raw resources which a country is abundant with. For example, textile is a large part of China’s industry due to large naturally found sources of cotton. The same could be said of chemical processing and construction materials in the country. The second question stems from the feasibility at which these goods are produced. Some are extremely difficult and require technology (like robots) to be able to mass produce them. Lastly, the third question addresses whether resources and goods should be equally split between people and whether some (like education) should be equally available to everyone.
Now, let us break down the very broad term "Capital". In general, this refers to the resources which can produce a series of goods in the future and are sustainable. Physical capital, one of the four factors which consist of man made inputs that provide a stream of benefits that can be “harvested” in the future. Human capital is a reference to the skills of people, abilities and knowledge that is acquired by people as well as good levels of health, which makes things more productive.
Scarcity is also one of the fundamental concepts of economics. While many associate economics with money, the stock market or money centric terms, economics is in fact much more than that. It can be described in many ways, a study of human emotions, a way to keep track of resources expanded.
There are many ways in which one part of our lives revolves around one economic concept. Take for opportunity costs for example. When you choose to make a decision which could see you spend, say $7 on a smoothie, did you think about saving on that $7 to enjoy something even better in the future? All of our actions have implications economically.
Next time when you want to spend money on your guilt food, think again. What could the money you save be used to buy? Will the benefit from eating be worth the money? Or can you use the money to treat yourself in other ways?
