Unlimited Wants

Posted by Abd. Ghafar Arif RM

If we were asked, we could all identify certain basic wants which must be satisfied if we are to stay alive. These include the obvious essentials of food, shelter and clothing. We might also identify those wants which are clearly less essential but which we think improve our quality of life. Some might include television sets, cars, trips to the cinema and so on. These are sometimes called luxuries but it is important to remember that what might be a luxury for one individual may be considered an essential for others. This is because we all have a scale of preference with our more urgent wants at the top and the less urgent ones at the bottom. Each individual's scale of preference is a product of a complex set of influences, involving our culture, upbringing and life experiences. These together influence our likes and dislikes. Unsurprisingly, since we all have different experiences, there is bound to be great variation between any two individual's scales of preferences. You may find it interesting to conduct a class exercise in which everyone makes a list of ten wants in descending order or priority. When you compare results you may be surprised to find that, although there may be broad agreement on the first few choices, there is likely to be considerable variation as you compare people's choices over the full list. You may also consider how your list would compare to lists compiled by others with very different life experiences, such as your teachers, your grandparents or even a student of economics in another city. A further point to consider is whether you could imagine any end to your list if you were not limited to ten choices. It is important to remember that our wants are continually expanding, developing and changing.

Some wants expend as we grow up, marry and raise a family. Imagine how our housing needs change as we go through this process or how we change from wanting a small car with two doors to wanting a large family saloon with four doors. Some of our wants develop and expand when we see others around us enjoying goods and services and we feel the need to keep up.

Sometimes, our wants change as we have new experiences, for example we might become vegetarian because we have seen a TV programme on the health risks of eating meat.

All of this points to the fact that we can never imagine a time when all our wants are satisfied. Our wants are continually expanding and changing. Despite the fact that we are continually finding new, more efficient ways to produce more and more goods and services with the resources available to us, we are still faced with the basic economic problem that we have limited resources and unlimited wants. This is sometimes called the problem of scarcity. As a result we have to make choices.

Source: As Level and A Level Economics, Colin Bamford, Keith Brunskill, Gordon Cain, Sue Grant, Stephen Munday, Stephen Walton, University of Cambridge, Cambridge University Press, 2002

Limited Resources

Posted by Abd. Ghafar Arif RM

In economic we categorize the resources available to us into four types. These are known as factors of production:

1.      Land

This is the natural resource. It includes the surface of the earth, lakes, rivers and forests. It also includes mineral deposits below the earth and the climate above.

2.      Labour

This is the human resources, the basic determinant of which is the nation's  to satisfy population. Not all of the population are available to work however, because some are above or below the working population age and some choose not to work.

3.      Capital goods

These are any man-made aids to production. In this category we would include a simple spade and a complex car assembly plant. Capital goods help land and labour produce more units of output. They improve the output from land and labour.

These three factors are organized into units of production by firms.

4.      Enterprise

This factor carries out two functions. Firstly, the factor enterprise organizes the other three factors of production. Secondly, enterprise involves taking the risk of production, which exists in a free enterprise economy. Some firms are small with few resources. The functions of enterprise are under taken by a single individual. In large, more complex firms the functions are divided, with salaried managers organizing the other factors and shareholders taking the risk.

Some economies have a large quantity of high-quality factors of production at their disposal. They can create lots of goods and services to satisfy the wants of their population. They are said to have a good factor endowment. Some economies lack sufficient quantities of one or more of the factors. Developing countries, for example, might have large quantities of land and labour but lack sufficient capital and enterprise. The former planned economies of Eastern Europe, such as Poland, have found it difficult to develop because they have few people with entrepreneurial experience.

Production and consumption

Resources are combined in the process of production to create goods and services. Goods and services have the capacity to satisfy wants. The process through which individuals use up goods and services to satisfy wants is known as consumption. Some goods, such as a chocolate bar, are quickly used up to satisfy our wants. Others satisfy wants over a longer period of time. These are called consumer durables. Examples of consumer durables include television sets, refrigerators and vehicles.

 
Source:

Colin Bamford, Keith Brunskill, Gordon Cain, Sue Grant, Stephen Munday, Stephen Walton, Economics As Level and A Level, Cambridge University Press, 2002

 

ECONOMIC PROBLEM

Posted by Abd. Ghafar Arif RM

We have to deal with a whole range of economic problem. You may have seen TV programmes about the misery of unemployment and poverty; you may have read about the difficulties caused by inflation or heard politicians discuss exchange rate crises on the breaking news. Despite this extensive range of issues, which economist are trained to consider, they often talk about the economic problem. This is the fundamental problem from which all others arise. This is the fact that we have scarce resources to satisfy our limited wants. As a result of this problem, which is sometimes called the problem of scarcity,  we have to make choices, and it is the task of the economist to explain and analyze the nature of choice facing economic agents, such as consumers, producers and governments.