What economics is about?
Economics is a study of economic activities
of human, and we find the
very interesting phenomena,
performed by human. And in economics, human refers to producer and consumers.
There’s one common factor of economic
activities performed by both consumers and producers, that is they make choice.
Every day, every moment, consumers and producers make choice that best
satisfies their want. Then economics study why people have to make choice.
There are some bases of knowledge that you
have to know before studying choice. The first one is want. What’s the meaning
of want? Want is the desire of goods and services that is unlimited. Want is
different from demand. Demand is a desire for goods and services that are able
to satisfy consumer’s desire. We will talk about that later. The second one is
scarcity. What’s the meaning of scarcity? Scarcity is a relative concept ,that
the available quantity of resource is not sufficient to satisfy all our want.
Remember when we talk about scarcity, we compare two things: we compare the resources
available and the want. When the resources available are not enough to satisfy
all people’s want, then we say that there is a problem of scarcity.
Why people have to make choice?

With these three hundred dollars, you have
a lot of wants of planning how to use this three hundred dollars. In the order
of your preference:
You want to buy an T-shirt, very very much.

And, you have another want is to join a one
day tour to Shenzhen.

And you have another want; you want to use these
five hundred dollars to buy a bag.

And actually you have many many many other
wants, but I’m not going to talk about it.
Let’s take a look on this three. You have
three wants here. You have $300 here. Can you buy them all? No. Why? You don’t
have enough money.
Do you think it is possible for all people to
get the things they want all the time? No. Why? Because resources are limited, resources
are scarce.
Since you can buy one thing now, you have
to make a choice. What is your choice? We are not going to talk about this
right now.
Now, we come to choice. This is a term in
economics. How are you going make your choice? When you make your choice, you
will make your choice according to your self-interest. You will try to maximize
your gain. How do you maximize your gain? You will make a choice which gives
you the highest benefit. In the view of consumer, highest benefit means that
can provide him of her the highest satisfaction. But in economics, we rarely
use satisfaction because it is hard to measure. We use lowest cost instead. You
will make a choice, which gives you the highest benefit. You will choose what gives
you t highest satisfaction, or with the lowest cost.
(to be continue…)I