BASIC CONCEPTS IN ECONOMICS

BASIC CONCEPTS IN ECONOMICS

I hated Economics in Secondary School; I use to doze off while my teacher would blah blah blah in front of the class. I went ahead to study economics education as my first degree and I was still bored but along the line. With my knowledge in basic learning psychology, I realized the problem was with the way I learnt not aligning with the way it was taught. Anyways I am re-learning and trying to teach economics as a fun and relatable course for the next person. Shall we?

Behavioral Objective

At the end of this post, readers should be able to:

·         Explain their understanding of basic economics concepts

Economics

Economics is a study that deals with how people choose among various alternatives on a daily level, on a social, regional, state and federal level. It is a social science that uses a scientific approach in the exploration of choices made by people.

Basic Concepts in Economics

1.     SCARCITY: In the definition of economics, the term ‘choose’ and ‘choice’ comes up. Seeing as they are prevalent is an obvious presence of Scarcity.

Resources to produce what we desire are limited.  For example we desire houses, schools, and medical care and so on but resources such as land, factories, oil and so on are limited. Because of this limitation we are forced to say no to certain thing, we are forced to choose amongst various alternatives (our desires).

Scarcity is basically the excess of demand over supply. It is the condition of having to choose over various alternatives. When you say a good is scarce, that means that a choice of one alternative will mean giving up the other alternative. Scarcity is a universal concept. Every country (developed and developing) experiences it because resources used to produce will always fall short of demands and this leads to scarcity. I can hear people from my Nigeria say China doesn’t experience scarcity. You have to realize that scarcity is a relative term but we all experience it.

For Example: You bought 5litres of petrol and you can either use the petrol you bought to fuel your car or fuel your generator. If you choose to fuel your car, you give up fueling your generator and vice-versa. Therefore we can say on your level, Petrol is scarce because it has alternative uses. Has you find new ways to utilize resources, they will become scarce. Just remember that the scope of economics is wide and this is on a basic level.  

2.      CHOICE: Scarcity leads to choice. That is the act of selecting one alternative over the other. The choices that we face can be broken down into three major economics question. The question of what to produce, how to produce and whom to produce for.

We want education, we want a budding entertainment sector, a great medical care sector and so on but the resource that we have at hand to make all of this happen is scarce. Since we can’t cater to all of these desires on the same level, we have to decide on what do we focus on first, ‘WHAT DO WE PRODUCE?’ with the scarce resources.

After the question of what to produce have been answered, there is the question of ‘HOW DO WE PRODUCE?’ There are various choices to be made by a society as to how a product gets produce. Do they produce with raw material founded within the country or produce outside the country? Do they hire 20 unskilled workers or 10 skilled workers? Should new materials be used or recycled materials?

A decision has been made on what to produce and how to get it produce. Now it is a question of who gets the produced goods. A decision to give group a will mean group b will not get it. This means a society has to decide on who gets it. This answers the question of FOR WHOW TO PRODUCE FOR.

This are the basic question in economics as every society must answer them, so they are always referred to over and over again.

3.     OPPORTUNITY COST: The concept of scarcity and choice leads to the heart of economics (at least that is what my lecturer says) ‘the opportunity cost’. You have 50mb and you are torn in between downloading SZA album ‘ctrl’ and downloading a TED educational video. If you choose to use that Mb on SZA’s album, you have simultaneously chosen to give up the benefit of the TED video. If the video is the most valuable of those choices, then the opportunity cost of the album is the value of the information and inspiration you expected to get from the video. What the opportunity cost isn’t is the Mb you are supposed to use to download the video. The opportunity cost is what you are sacrificing in place of what you picked i.e. the information and inspiration. Opportunity cost is the VALUE of the best opportunity forgone in a particular choice. 

        There you have it; those concepts are the foundation of economics.

Summary

Think of it this way; remember that Drake said it on his More Life playlist “can’t have everything but I want everything” this equates to SCARCITY. A good is scarce if you having it would mean you have to give up another, based on this you have to make a choice.

Remember this quote “you can do anything but not everything” this brings us to choice; the fact that we can’t have everything forces us to make a choice based on those three questions. But we have to think of the value of what we are giving up for our choice. That value of our best alternative that we gave up is the opportunity cost of our choice (the concept of opportunity cost makes me think about Rihanna’s Russian Roulette)

ASSESSMENT: Trace tv has just 30 mins advert slot for the 13^th of December, they are considering whether to advertise wizkid’s Starboy’concert or Davido’s 30 billion tour. Assuming both events only have trace tv as their advert outlet and same amount of money to be paid for the advert, identify the concept of scarcity, choice and opportunity cost.

*Answer would be in the next Blogspost Series*

Thanks for reading

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