Basic Concepts Of Economics

CONTENT

1. Concepts of wants and scarcity
2. Choice and scale of preference
3. Opportunity cost.

CONCEPT OF HUMAN WANTS
Wants refer to numerous goods and services which are desired for consumption.
In economics, wants are what we are interested in having but without money or willingness to part with money to have it at that point in time.
They could be in the form of tangible goods or services. Tangible goods include, goods, houses, television etc; or services such as a driver, cobbler, actor, legal or medical services.
Human wants are insatiable, because the means of satisfying them are limited. i.e. scarce
Wants are also called ends, desires, aims or objectives.

SCARCITY
In economics, Scarcity is defined as “Limited in Supply” that is to say, all things being scarce or limited in supply is in relation to the demand for them.
This means that before we say something is scarce, we must have compared the available quantity with the present level of demand for it based on the available resources.
Goods and services for sale may be plenty but these in economic sense are still scarce as long as people do not have enough money to satisfy all their wants.
So, Scarcity does not mean shortage of resources. Therefore, things can still be regarded as scarce even when it is readily available.
The issue of scarcity is central and fundamental to the study of economics that it may be said that without scarcity there will be no need for the study of economics.

EVALUATION

1. Write a short note on human wants.
2. Explain scarcity in economics.

CHOICE
Since human wants are unlimited and resources available to satisfy them are limited, hence choice has to be made.
Choice is therefore the selection among different alternatives.
The decision to have one thing instead of the other implies choice. Such economic decisions are made by individuals, firms and the government. So every economic decision is a choice. The three aspects of choice are:

1. Deciding the resources to be produced and utilized;
2. Deciding how to get the resources;
3. Deciding when to use the resources.

SCALE OF PREFERENCE
This is the list of consumer’s want in order of their importance. It has to do with the ranking of a person’s want in order of their importance. The want at the top are supposed to be satisfied before other wants.

IMPORTANCE OF SCALE OF PREFERENCE

1. It is a tool for arranging human want.
2. It helps in choice makings
3. It ensures optimum allocation of resources.
4. It shows human want at a glance.
5. It helps consumers to utilize their resources.

OPPORTUNITY COST
This can be defined as an alternative forgone. This concept is also called the real cost or true cost.
For example if Mr. Audu decides to buy a television set instead of a radio set then the opportunity cost of the television set bought is the radio set forgone.
The concept of opportunity cost helps in our daily decision and applies to individual firms and government. It helps an individual to make the right choice among their many needs by allocating his services resources in the best known way.
It helps firms to allocate more of the resources in the production of goods and services, that will give them highest contribution margin (profit). To the government, it helps them to make the right choice as regards what project it slowly spends its resources on. For example, Lagos State government with her limited revenue may decide to provide free education and medical care.
EVALUATION

1. Define Opportunity cost.
2. What is Scarcity of resources?

READING ASSIGNMENT
Amplified and Simplified Economics for sss by Femi Longe page 5-7.

GENERAL EVALUATION QUESTIONS

1. Define Economic goods.
2. Give two examples of Economic goods.
3. Differentiate between Economic goods and non-economic goods.
4. Has the concept of opportunity cost any relevance to the West Africa countries?
5. Distinguish between opportunity cost and money cost.

WEEKEND ASSIGNMENT

1. Opportunity cost is defined as (a) Money cost (b) Cost of production (c) Real cost
   (d) Variable cost
2. The most basic concern of the economist is to (a) create human wants (b) satisfy all human wants (c) redistribute income so that it is used correctly (d) the alternative scarce resources to satisfy human wants
3. Scarcity in Economics means that resources are _ (a) needed to satisfy human wants (b)never enough to share among the producers of goods and services (c) resources to meet essential wants are unlimited (d) are not enough to share among the producers of goods and services.
4. Choice is necessary because resources _ (a) are limited (b) are scarce (c) can be seen everywhere (d) are available
5. Scarcity in economics refers to __ (a) a period of production (b) hoarding of goods (c) monopolization of existing supply of resources (d) resources being limited

SECTION B

1. What is scarcity in economics?
2. a. Define opportunity cost.
   b. State the opportunity cost in each of the following actions;
   i. A shirt purchased for 1000 instead of a pair of shoes;
   ii. Oranges planted on a farm realizing N50, 000 instead of mango that could have realized N60, 000.