Definition of Economics
The first thing that we should discuss is the definition of "economics." Economists generally define economics as the study of how individuals and societies use limited resources to satisfy unlimited wants. To see how this concept works, think about your own situation. Do you have enough time available for everything that you wish to do? Can you afford every item that you would like to own? Economists argue that virtually everyone wants more of something. Even the wealthiest individuals in society do not seem to be exempt from this phenomenon.
This problem of limited resources and unlimited wants also applies to society as a whole. Can you think of any societies in which all wants are satisfied? Most societies would prefer to have better health care, higher quality education, less poverty, a cleaner environment, etc. Unfortunately, there are not enough resources available to satisfy all of these goals.
Thus, economists argue that the fundamental economic problem is scarcity. Since there are not enough resources available to satisfy everyone’s wants, individuals and societies have to choose among available alternatives. An alternative, and equivalent, definition of economics is that economics is the study of how such choices are made.
Economic Goods, Free Goods, and Economic Bads
A good is said to be an economic good (also known as a scarce good) if the quantity of the good demanded exceeds the quantity supplied at a zero price. In other words, a good is an economic good if people want more of it than would be available if the good were available for free.
A good is said to be a free good if the quantity of the good supplied exceeds the quantity demanded at a zero price. In other words, a good is a free good if there is more than enough available for everyone even when the good is free. Economists argue that there are relatively few, if any, free goods.
An item is said to be an economic bad if people are willing to... [continues]
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