Economics

Many people might say that economics is the study of money but it is not. Economics is derived from the Greek word oikonomos, which means "one who manages a household". likewise, economics is the study of how society manages its scarce resources. scarcity means that society doesn't have enough resources to fulfill all the wants of its people. Scarcity is the reason why managing resources is very important because we don't have enough resources to provide the highest standard of living to all people. This is the reason society must decide how and where to use its resources such as oil and human labor to maximize productivity

How do we know what we ought to do/produce?

one of the principles of economics is that people face trade-offs. Trade-off means that when we do one thing then another thing is compromised to some extent. For example, if I work for more hours then I would have less leisure time. What should we do depends on the concept of opportunity cost. opportunity cost is the cost you incur when choosing a particular alternative. Not being able to earn money as much as I could because of going to college is the opportunity cost of going to college. People/countries chose alternatives based on which have the least opportunity cost. this is the reason why many countries like the USA chose to import textile goods from South Asia and focused on producing Boeing jets and IT software. The USA chose this alternative because the opportunity cost was less than the other alternative. Their efficiency and skilled labor caused the opportunity to be less for producing jet and IT software. South Asian country Pakistan on the other hand focuses more on agricultural and textile products because its opportunity cost is less than producing jets and IT products.

How do we allocate products/services?

if resources were not scarce then we could have all managed to live in big houses and drive Tesla. unfortunately, that is not the case, and not everyone could afford to have very high standards of living. How many products/resources are allocated to a person depends on the supply and demand of labor. jobs that are relatively easy to do will have a high labor supply and as a result, the person doing that job would have less share of the goods and services produced. For example, a food delivery man may not earn that much because the labor supply is high as there are many others just like him. On the other hand, some skills are technical and result in a short labor supply. This results in a person getting more share of the product and services produced. this is the reason why a surgeon earns more than a delivery man because the supply of surgeons is fewer compared to a delivery man. Also, Bill Gates is a billionaire because of his unique skills that led to the development of one of the biggest corporations called Microsoft.

the demand for a person also explains why some people earn more than others. some sports players like Ronaldo and Messi earn a lot because of the demand they have around the world. People love to see them play and as a result their demand increases. This demand is not necessarily a bad thing as it contributes to the economy. More demand leads to more football matches being held, which leads to more people getting employed such as event organizers and security guards.