is principles of economics hard
Economics is present everywhere; it is tough to find a system where the Economy is absent. Economics is everywhere, just like omnipotent God. It never fails in creating an interference. It Is widespread and divided into many forms. Watching a video on Youtube also involves Economics. NASA doing their Mars and Moon mission also completely depends on an economic model. Without it, we could not even set foot on the moon. Ultimately, Apollo mission would not exist if the USA wasn’t a world-leading economy. It is a part of our life, and yet we know almost nothing about it.
Sports, Cinematic Universe, Science, Defence, Healthcare, Food and almost everything in this world solely depend on Economics.
You cannot even run your house without an economic model for your expenditure.
So let’s start to try and understand what economics is. To do so, first, let us know what the Economy is.
What is Economy?
It is the name given to the system in which people perform economic activities to properly distribute goods and services. Example: every country is an economy.
But then imagine a place where everything is unlimited. This place will not be an economy because there are no need to economize (optimal, thought-full use of) things without scarcity, and there will be no economics. So a British economist Lionel Robbins defined economics as:
Economics is the study of the use of scarce resources which have alternative uses.
What is Scarcity in Economics?
Scarce means the sum of what everybody wants is more than the sum of what everyone has. But scarcity is not an easy thing to understand. If we look at humans’ present quality of lives, it has been the most affluent in history. Any person who died around 1950 is given a chance to re-live in the present world as a middle class, would consider this place as heaven. Many countries, incredibly the rich, say that humans nowadays are just living by, compromising their wants. Many media houses can be seen complaining about the dreams of middle-class people not getting fulfilled. Many middle-class people of rich places like the USA, European countries can be seen complaining to the government about their situation. Still, if we compare their life to many people worldwide, they are so damn well off. This is what scarcity is. Humans continuously want to improve the quality of life. Never get satisfied with what they have and keep wanting more. With the abundance of needs and wants, there is an abundance of scarcity for resources that are not unlimited in this world.
What is Productivity?
As needs and wants are never-ending, we need to produce new things to fulfill them and improve the quality of life as current outputs will not be enough now. We must deal with existing goods, services, and outputs and produce new ones. While doing so, we need to look into the diversity of its uses, choose a specific use, and implement it effectively. Because the same iron ore can be used to make paper clips, automobiles, and skyscrapers. So basically, you have to make the right choices. In other words, economics is the study of choices. But it does not just stop here. Economics also needs to study the effectiveness of producing new goods, outputs.
Economics: Simple Illustration of Productivity
Let us say you have chosen to make an automobile with iron ore. While doing so… you should try using as much less possible iron while ensuring the desired output. i.e., you have to be efficient, or you will discover later that, though the choice you had made felt right, you have failed. To understand this, we must observe Venezuela and Japan. Japan has high development and living standards several times than Venezuela even though they have significantly less natural resources. This happens because Japan uses its resources while producing its output efficiently. Venezuela fails miserably to do so. So you must use the highly efficient process to produce an output as these are the deciding factors between poverty and prosperity.
The basics of economics are the same for all. However, still, you see different outputs for different countries because just good intentions don’t work. It’s the consequences that hold importance. You actually need to understand what economics is. It is the systematic study of cause and effect, showing what happens when you do specific things in a particular way. Here is a flow chart to summarise and help you understand; remember what economics is.
The simple definition of Economics:
It is the Study of,
- Choices. It is done to predict people’s choices in the present and future, i.e., Sherlock Holmes stuff.
- Cause and effect, which helps us understand what steps to take in the future.
- How humans make optimal use of scarce use according to their situation.
- The struggle for humankind to improve their life quality due to their unlimited wants and needs.
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