The Basics of Economics

By Arjun Shekdar

Economics is something that affects our lives every single day, even if we don't know it. From how much a candy bar costs to how much money people make, economics is what informs us about how money and resources work. Many people think that economics is simply about money, but really, it's actually all about choices and understanding how the world works. In this essay, I will cover three basic principles of economics: supply and demand, opportunity cost, and scarcity. These principles are important because they help us make smart decisions about money and resources.

Supply and demand is perhaps the most important idea in economics. Supply is the quantity of something that is available, and demand is the quantity of something people want. When lots of people want something but there is not much of it, the price will go up. When there is lots of something but not many people want it, the price will go down. For example, if a new video game comes out and everyone wants it but there are only a few copies, the price might be high. But if too many copies are available and nobody is buying it anymore, the price will likely go down. This illustrates how supply and demand influence prices in shops and even salaries at work. Knowing this can assist individuals in determining when to sell or buy items. 

A fundamental principle in economics is the opportunity cost. It implies that when you choose to do one thing, you are giving up the chance to do another thing. Any choice has a cost, even though it may not always be financial. For example, if I spend an hour playing video games, I give up the chance to study or get things done in that hour. In economics, knowing the opportunity cost can help people make smarter decisions in how they spend time and money. Businesses use the principle too, like choosing to make one product instead of another. Thinking about what we are sacrificing helps us make smarter choices. Scarcity is the idea that there are limited resources, but people have unlimited wants. It is one of the biggest reasons economics is even a thing.

We can't have everything we want, so we have to make a decision. Scarcity happens with things like time, money, food, and even clean water. Governments and businesses use economics to decide how to distribute resources in the best way. For example, a company might decide to use less plastic for packaging to save materials and money. Humans also have to think about scarcity, like when they save money instead of spending it all. Economics helps us understand how to deal with not having enough of something. In a nutshell, economics is not all about money—it's about choice, trade-offs, and resources. Supply and demand show us how prices work, opportunity cost reminds us that there's no such thing as a free lunch, and scarcity explains why we can't have it all. These basic ideas help individuals and governments make better decisions every day. It is important that everyone studies economics. It helps us understand the world around us and in making smart choices.

Sources:

1. Investopedia. "Supply and Demand." https://www.investopedia.com/terms/s/supply-and-demand.asp

2. Khan Academy. "Opportunity Cost." https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial

3. International Monetary Fund. "What Is Economics?" https://www.imf.org/external/pubs/ft/fandd/basics/economics.htm