Balancing Choices and Scarcity: Subject Matter of Economics

Economics is the study of how individuals and societies choose to use scarce resources at their disposal. The needs and desires of individuals are unlimited. Satisfying those needs and desires requires the production of goods and services. All the goods that are not sufficiently abundant to be available to everyone for free are said to be scarce. Their scarcity follows from the scarcity of resources we use to produce them. If scarcity of resources were not a problem, it would be possible to produce all goods and services in sufficiently large quantities to make them available to everyone for free. This is not possible because material inputs and factors of production needed to produce goods are not available in unlimited quantities. The economic problem arises because of this scarcity. Famous British economist Lionel Robbins views economics as a discipline studying human behavior as a relationship between ends and scarce means with alternative uses. Thus, economics could also be defined as the study of how society sets priorities in managing its scarce resources.