So why are you here this semester taking economics?
What's it all about?
A lot of people have misconceptions about
economics -- that we'll spend our time studying
investments, stock market, finance....
Uh-uh.
We're studying people, folks, and why they
behave the way they do.
Two facts are true about everyone regardless
of gender, creed, color, or income.
The first is unlimited wants -- everyone has
unlimited wants.
Take my own family for example; we have a
nice home, two dogs, cat, two cars, a big
TV, multiple computers -- and yet no matter
what we have, we’d always like to have more.
I'd like a double oven, new carpeting; I'd
like to get the house painted.
And my husband’s always dreamed of his own
airplane with a home in an airpark.
My daughter?
A new handheld game, cell phone, clothes,
music -- even if we ended up getting these
things there'd always be something else.
That's unlimited wants.
What's the problem with having unlimited wants?
Well, everyone also has limited resources,
which means there is no possible way to satisfy
all those things we'd like to have.
Maybe you don't have enough time to do everything
you'd like, or you don't have enough money
to acquire those things that you would like.
One thing is certain: with unlimited wants
and limited resources, choices must be made.
And that's it, really.
To put it simply, economics studies choices.
What choices will people make about how to
utilize THIS many resources, to satisfy THIS
many wants?
By definition, economics is the study of how
people choose to use their scarce resources
in an attempt to satisfy their unlimited wants.
Well, what does this mean exactly?
As I read through the definition, the first
unfamiliar term that I see is the word “scarce.”
What is scarcity?
Scarcity means that there's not enough of
something -- a product, service, or resource
-- to satisfy everyone's wants, at a zero
price.
This last part is important; it tells us that
if I tried to provide the product for free,
there won't be enough to go around.
So how do I decide who gets the product?
Well, one way is to start charging money;
those who are not as serious about acquiring
the product will drop out, those who are willing
to pay the price tag will get the goods and
services.
Not a perfect system, mind you -- can you
think of any drawbacks?
How about the fact that the wealthy get the
goods and services, while the poor go without?
As I said, not a perfect system -- but hey,
that's capitalism.
Anyway, that's how you recognize an economic
good, or a good that is scarce: it will have
a price tag indicating that people are willing
to pay to get the product.
If something is non-scarce, that is, there
is enough to satisfy everyone's wants even
at a zero price, than there'd be no reason
to charge for it.
Such a commodity would be known as a free
good.
Can you think of any free goods?
Breathable air, maybe?
But even this may become scarce at some point.
OK, so economics is the study of how people
choose to use THIS many resources in an attempt
to satisfy THIS many wants.
Well, how do people choose?
People make choices that they believe are
in their own interest -- rational self-interest.
They look at the pros and cons (economists
refer to benefits and costs) and decide whether,
on net, a choice is good for them.
Think about this: You're out for a walk and
you find a wallet.
You look inside for ID and find that there's
$1000.
What could you decide to do?
What are your possible choices?
Well, there are a lot of them: you could return
the wallet and the money to the owner; you
could return the wallet without the money
to the owner; you could keep the money and
leave the wallet where you found it; or you
could just leave the whole thing...
There really are a lot of choices that you
could make, but which choice is the rational
choice?
Well the rational choice depends on the individual
decision-maker.
All choices are going to be rational to the
person that makes them.
Whether you think it's right or wrong doesn't
mean that it wasn't rational for someone else;
it just means that they had a different set
of parameters that they based their decision
on.
Here's a challenge for you: Can you come up
with any example of a decision that's not
rationally self-interested?
NEXT TIME: Resources
TRANSCRIPT00EPISODE 2: SCARCITY & CHOICE
