Question

Define economics and how economic factors effect individual choices and how all these choices come together to shape the economic systems.

Answer 1

Economics is not mere money. It's about weighing various choices, or alternatives. Some of those major choices involve money, but most do not. Most of your regular, monthly or life-time choices have nothing to do with capital, but they are still the subject of economics. For example, your decisions about whether you or your roommate should be the one to clean up or do the dishes, whether you should spend an hour a week volunteering for a dignified charity or sending them a little money via your cell phone, or whether you should take a job to help support your siblings or parents or save money for your future are all economic choices. In certain situations, money is merely a useful tool or just a cover, standing in for a partial way to determine some of the priorities that you really care about and how you make decisions about those priorities.

Economics, in the end, is the study of choice. Because choices span every conceivable aspect of human experience, so does the economy. Economists have investigated the nature of family life, the arts , education, crime, sports, law the list is virtually endless, because so much of our lives involves making choices. Choosing among alternatives includes three main economic ideas: scarcity, competition, and cost of opportunity.

If our resources were unlimited as well, we could say yes to every one of our wishes — and there would be no economics. We can not say yes to anything, because our resources are limited. Saying yes to one thing requires us to say no to another. Whether or not we like it we have to make choices. Our unlimited desires constantly collide with the limits of our resources, forcing us to pick out some activities and reject others. Scarcity is the condition that you have to choose between alternatives. A scarce good is one for which the option of an alternative use of the good involves the renunciation of another.

However, not all goods confront us with those choices. A free good is one for which we don't need to sacrifice another to pick one consumer. Gravity is one example of a free-good. The fact that gravity binds you to the earth doesn't mean your neighbor has to float into space! Use of gravity by one person isn't an alternative to use by another person.