Introduction to Economics: Basic Concepts and Definitions

Basic Concepts and Definitions

“Economics” comes from the Greek word oikonomia which means “household”. If you reflect on the word “economics” to your real life you can say: “My household is my economy. I have to run and manage family economy this way so that it will survive for the entire year (every year). The meaning of this is that I have to do budgeting, paying bills, etc.”

It is also a study of how societies use scarce resources to produce valuable commodities and distribute them among different people with various needs.

But first we should know what are the needs of the people? Masllow divided the needs of the people into 5 levels. Let’s take a look on Abraham Maslow’s hierarchy of needs:

As you can see in Maslow hierarchy of human needs people have different needs which may come into different levels. Right after you satisfy the first level of needs, you go up to another level because your needs and wants tend to increase. Somehow we can say that people have never enough. Even though they satisfy all the necessary needs which are only needed for life there will always be more and more wants and needs which increases to infinity.

Short and simple video about Maslow`s hierarchy of needs:

But you have to consider also that there are always unlimited needs/wants but only limited resources.

For this reason Economics is also a study of how individuals within a society generally make choices that involve the use of scarce resources from among alternatives wants that need to be satisfied. These resources and the goods produced from them are not freely available for they require using up other resources to obtain them.

In order to have a sustainable development, the present resources must be managed. Not just for a short period of time but especially for a long-term planning to make efficient use of these resources which means the highest gains for the least cost.

Next lesson Scope and Nature & Positive and Normative Economics…