The basic problem in economics is how to satisfy unlimited wants with limited resources

Economics & You

Think of the last time you said that you needed something. Was the object really necessary for your survival? Read on to learn that people must make choices about how to spend their limited resources.

What, exactly, is economics? Economics is the study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants. Economics is divided into two parts. Microeconomics deals with behavior and decision making by small units such as individuals and firms.

Macroeconomics deals with the economy as a whole and decision making by large units such as governments.

People often confuse wants with needs. When they use the word need, they really mean that they want something they do not have. Obviously, everyone needs certain things, such as food, clothing, and shelter, to survive. To economists, however, anything other than what people need for basic survival is a want. People want such items as new cars and electronics, but they often convince themselves they need these things. In a world of limited resources, individuals satisfy their unlimited wants by making choices.

Like individuals, businesses must also make choices.

Businesspeople make decisions daily about what to produce now, what to produce later, and what to stop producing. Societies, too, face choices about how to utilize their resources. How these choices are made is the focus of economics.

• economics: the study of how people make choices about ways to use limited resources to fulfill their wants
• microeconomics: the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms
• macroeconomics: the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments