14. What are the ways economic knowledge help us in succeeding in our material welfare?

Economics helps answer a lot of questions in a contemporary society – allocation of resources, inflation, unemployment, discrimination, economic growth, pollution and poverty. Thus, studying economics enables us to improve our own as well as a nation’s welfare. Economics is a powerful tool which, once learned, enables us to separate facts from emotions and effect relationships carefully. Economic reasoning helps to evaluate the advantages and disadvantages of choices we make in order to gain our aims. Economics is the study of how to gain a living. We can realize where our money comes from and goes in and how to manage money we get.

Scarcity and choice: the economic problem

1. What do people realize going through their lives?

One of the things that young people discover as they become older is that they can’t have everything. Everybody goes through the life having to make choice.

2. What are economic goods and free goods?

Economic good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is one for wich the supply is less than the demand. Free goods are what is needed by the society and is available without limits.

3. Why do all economic units have to make their choices?

Because there is not enough of everything to go around. Economists note that there is no limit to the amount of kinds of things that people want. There is, however, a limit to the resources, things used to produce goods and services, available to satisfy those wants. Once that limit is reached, nothing else can be produced. Thus, every society is faced with* the identical problem, the problem of scarcity.

4. What does individual choice depend on?

Individual choice depends on our income, wealth and ability to borrow. Individuals and families are limited by the size of their personal income, savings and ability to borrow. Income, savings, profits and taxes enable people, institutions and government to purchase goods, products you can see or touch, and services, work performed for pay that are enjoyed by others.

5. What are governments and businesses limited by?

Business firms are limited by the size of their profits, savings and ability to borrow. Governments are limited by their ability to tax and borrow. Income, savings, profits and taxes enable people, institutions and government to purchase goods, products you can see or touch, and services, work performed for pay that are enjoyed by others. The problem that each must face, however, is that once the decision has been made to choose one set of alternatives, one loses the opportunity to choose the other.