What is Economics?

Economics is all about making choices. But first we must know what an economy is.

Most people think of an economy as a system for the production and distribution of the goods and services we use in everyday life. That is true as far as that goes, but it does not go far enough. The Garden of Eden was a system for the production and distribution of goods and services, but it was not an economy, because everything was available in unlimited abundance. We live in a world of scarcity (not unlimited abundance). Living in scarcity, means there is a need to economize (make the most of what we have). It was once said that "economy is the art of making the most of life", economics is the study of how we do that. Simply put, economy is determining what I want, and what I am willing to give up (or not have).

Let's look at some definitions of economics:

• Lionel Robbins (British Economist) once said, "Economics is the study of the use of scarce resources which have alternative uses".
• Economics is the study of how a society uses its limited resources to satisfy its needs and unlimited wants. It also is a study of wealth and of people, and how they make decisions.
• Economics is man making choices as to how to best use his limited resources in order to be a good steward before God.
• Economics is the study of how people try to satisfy seemingly unlimited and competing wants through the careful use of relatively scarce resources.

So, to understand some of these definitions and unpack their meaning -- we must understand and clarify some other key words. Scarcity is one of those words.

Scarcity is the condition that results from society not having enough resources to produce all the things people would like to have. What everyone wants adds up to move than there is. Simply put, we want more than we can have. Hopefully that idea of scarcity helps us work through the idea of 'economics'. It is often expressed by simply stating that we face trade-offs. We must make choices; we cannot have more of everything, so to get more of some things, we must give up other things. For example, a student who wants higher grades generally must devote more time to studying and less time to, say, video games or social media; the trade-off in this instance is between grades and entertainment.

Economics starts with a very important assumption: Individuals act to make themselves as well off as possible. In the big picture, life does not as us what we want. It presents us with options. Economics is one of the ways to make the most of those options.

Notes: What are things you want that cost money? I'm giving you $100, what are you going to to? What are you going to get? What are you going to give up?