AP Economics

Economics is a study of how people navigate through life.

Economics is the study of how people (or organizations) behave (make decisions) when trying to satisfy unlimited wants with scarce resources. Basically, economics is a study of the response to the truism, “You can’t have it all.” Certainly some individuals (and countries, businesses, non-profits) can get more than others, but everyone and everything faces limits. You might stumble a bit right at this truism. You may be tempted to say, “Mark Zuckerberg is worth $40 billion, and that would be more than enough for me to get everything I want, and he probably feels the same way.” But, would $40 billion really buy you everything you want. There are many of uncertainties in this world. Certainly you could buy the best food and healthcare and go on amazing trips. You could own one of every car model made and dozens of houses. But, you couldn’t insulate yourself against all harms. You couldn’t buy peace in the Middle East or anywhere else for that matter. You couldn’t immune yourself against all diseases or protect yourself against all natural disasters. You might be able to contribute toward the political stability of a country, but you couldn’t guarantee it. Indeed, even though you may be able to make your life very comfortable (relatively speaking) you would face limits on making your own and other peoples’ lives free of need.

Governments are the same way. Even the richest government in the world faces limits. The United States took in $3.9 trillion in tax revenues in 2015 (more than the total GDP of all but the 5 wealthiest economies) but still falls woefully short of providing all the goods and services its populace desires – such as high quality roads, bridges, airports, health care services, education, research grants, clean water, clean energy, solid and liquid waste management, electricity services, national defense, homeland security, disability services, and the list literally goes on and on. And that gets us to the point of economics, “since we can’t have it all, what should (and do) we do?”

And the funny thing is we all already knew what I just wrote in the last two paragraphs. This truism is part of the reality of studying economics, for the vast majority of the subject is common sense – but not necessarily intuitive. So let’s get started.