In this new series we’ll provide a basic overview of the field of economics and explain the importance to everyday life. Question: What do you think is the fundamental thing that economists are most concerned about? Hint: If you answered “money” you’re incorrect.
So, if economics isn’t about money, then what is it about? Actually, economics is all about one primary thing- CHOICE. Economies, particularly those in so-called Market-based systems, are all about the choices consumers make each and every day. Decisions like where to shop, what to buy and how much are choices we make all the time. Businesses, both small and large, are consumers too! They are constantly deciding matters such as how much of a given product or service to sell, how much inventory to retain and how many employees to hire, just to name a few. Government as well is a major part of most economies, and contributes trillions of $$$$ through employment, the purchasing of goods and services, state and local funding, research and development, health and human services and international trade.
It’s helpful to think of our economy overall as a system, and like most systems, a lot is going on all at once. BUYERS have to decide what to buy at a certain price, or to maybe not do so at all. SELLERS are much the same in that they have to determine when to sell, how much and at what price. Currency ($$$) is constantly circulating within the system to make all this happen. When buyers and sellers connect and agree upon a given price, a choice is made. An infinitesimal number of these transactions occur all around the world every minute. By now you may be wondering “So how does this apply to me?” This same system happens for us everyday consumers, of course on a much smaller scale. Whenever we go to the grocery store and pick chicken over steak or potatoes over carrots, we are making an economic choice. In the same fashion when we get up and go to work each day, we are making a choice. Not working at all or taking time off to raise a family are choices too. What brand of toothpaste I purchase regularly (Crest) is yet another of the many economic decisions we make all the time.
So…again you ask “What does all this have to do with me?” Quite a lot actually. Each of us are important parts of this overall system we call an economy. Because there is a limited supply of money (This is known as Scarcity-another topic we’ll go into another time), each day we have to make decisions that impact other parts of the system. Most of the time we don’t even think about making a choice, or that what we have chosen will have an effect on what someone else has chosen and so forth. This is understandable, because we’re instead worrying about all the other concerns of modern life. Don’t sell yourself short however. You’re an important part of an incredibly complex system that impacts all of us every day.