Basic Economic Ideas
What is economics? : Economics is the study of how we make decisions when resources are limited. It has been called “ the science of decision making”.
We have to make economic choices when faced with needs (things we need for survival), and wants (things we want but don’t need for survival). When making economic choices, it is important to be fiscally responsible- not spending more than you earn.
For example, an economic choice would be choosing between paying your house rent, or buying a new car.
Scarcity means that we do not have enough resources to produce all of the things we want to have. When this is a problem, we have to make choices with other alternatives.
Because scarcity is a major economic problem in the world, society sometimes has to decide what to produce with limited resources.
For example, if gas becomes too limited, cars will have to run on electricity.
Society as a whole has to answer multiple economic questions. What do we produce with our limited resources? How do we produce it? Who do we produce it for?
For example, How do we distribute the goods? Most goods are distributed through the price system.
Short and Long Term Expenses
Short term expenses include essential expenses (things you have to pay for in order to live), Non-essential expenses (things you do not have to have) essential fixed expenses (things you need that cost the same every month),and essential variable expenses…