Introduction to Economic Understanding Scarcity Value Scarcity The

Introduction to Economic Understanding Scarcity & Value

Scarcity The problem that we tend to have is that we have unlimited wants, while at the same time having scarce resources. Everyone has to make decisions about scarce resources every day and the best way in which to use them.

So what is Economics? Economics is the study of what goes through people’s minds when they are making decisions about what to do with their scarce resources. Knowing this will give you the power to understand (and maybe predict) the decisions that people make every day.

Revision Essentials Resources – Things that are needed in order to satisfy wants, e. g. money, time, staff or land. Scarce Resources – A situation where there aren’t enough resources for everyone to get what they want all of the time.

Resources & Value Individuals, businesses and the government will not use their scarce resources unless they believe that what they are giving up is worth as much (i. e. getting the same value) as what they are getting in return. Remember, scarce resources can be time, staff and others as well as money.

Value & Satisfaction Items are valued on how much satisfaction they bring to the owner. A person is likely to value an item more highly if he or she will get more satisfaction from it than someone else would. I. e. someone living in London may value a holiday in the country more than someone already living there.

Revision Essentials Means of Exchange – a method for allowing transactions to take place, e. g. Money or (years ago) gold. Satisfaction – the enjoyment received when consuming a product or service (or resource) Value – the worth of something represented by the amount of money we are prepared to pay for it.