scarcity, choice and economic reasoning the right start
TRANSCRIPT
The Unexpected Pleasure of Teaching Economics
Economics is the study of how humans choose to use scarce resources to achieve personal and social goals.
Why Do We Choose?
Scarcity: a condition of being scarce, not common, not plentiful. Webster’s
Scarcity: a situation where human wants are greater than what limited resources can satisfy. Economics textbook
Scarcity: a condition that exists when a resource has at least two valuable uses.
Valuable Use
A use for which individuals willingly sacrifice; to voluntarily bear a cost to avail oneself of this resource.
Scarcity and Abundance
A resource can be both abundant and scarce if it has more than two valuable uses. Columbia River Mississippi River
Not Plentiful, Not Scarce
Smallpox virus Economics textbook given to a
literature major. Hamburger to a vegetarian Fur coat to a PETA member
Economic Reasoning: Major Premise
All social phenomena emerge from the choices that individuals make in response to expected costs and benefits to themselves.
Paul Heyne
Key Ideas
Incentives: anticipated cost or benefits, monetary and nonmonetary, that influence individual choices.
Applications
Needs: Something that people will pay any price, bear any cost to obtain.
Wants: Something that people make a choice to obtain depending upon the cost or sacrifice.
Needs vs. wants
The concept “Needs” is not helpful when trying to explain or anticipate human behavior.
“Needs” suggest individuals have no choice with regard to their behavior.
“Wants” suggests the scarcity forces individuals to choose among alternatives.
Importance of Social Choice: Three Key Questions
What to Produce? How to Produce? For Whom Will It be Produced?