Economics is a social science that deals with efficient use of scarce resources to achieve maximum satisfaction of wants. By efficiency here we mean the small use of waste and target is achieve. There are certain basic things that human beings need for example air, water, shelter and clothing. Certain other goods and services are also needed to maintain a certain standard of living to produce these goods labor and managerial talent, land and mineral deposit tools and machinery are used. Wants are unlimited but the resources needed to produce them are scarce so economics deals with creating a balance between the two.
Economics have a certain way of living at things.
- Scarcity and Choice
- Rational Self-Interest
- Marginalism-Marginal Cost and Marginal Benefits
Scarcity and Choice
The resources are limited in nature so goods and services that are produce should be also limited because we cannot have everything we have decide what will we have and what we will forgo. And the core of economic is that there is no free lunch. There may be treated to lunch that is free to you but it has a cost to someone somewhere. Because resources are limited and they can be used in alternative production activities. So one thing is sacrifice to make another. Economics is called the sacrificing opportunity cost.
Economic is based on the assumption of rational self-interest. Individual Perform those activities that will give them greatest satisfaction. Rational behavior means behavior satisfaction.
- Individual will make different choices under different circumstances.
- Different individual will make different choices.
- Decisions may change as benefits and costs.
- Self-Interest is not same as selfishness.
- Self-Interest means that one is trying to achieve satisfaction for one self. For example Charity work also leads to satisfaction of some individuals.
Marginalism-Marginal Benefit and Marginal Cost
Economics is focus on marginal analysis comparison of extra benefits or extra cost for example should you do MS after BBA or should you study one hour in both these cases are extra benefits and extra costs if the marginal benefit of option exceed from the marginal cost then that option is selected.
January 25, 2019