Economics is everywhere
Harry Potter may seem like he lives in a world where wizards have a wand and receive instant gratification, but that’s a view that needs to be demolished by the Womping Willow. Scarcity exists in the magic world just as much as in the Muggle world. There are a limited number of tickets to the Quidditch World Cup, magical creatures only shed so many feathers or hairs to go into wands, and not everyone has an invisibility cloak. J.K. Rowling’s fictional world . . . has its own central government (the Ministry of Magic), owl postal system, jail, hospital, news media, and public transport, not to mention Gringotts Bank and a special wizard currency. There are enough institutions to make Adam Smith salivate.
With scarcity and a monetary system, the Harry Potter series should be a case study for any economics course.
Starting at a very young age, many Americans use the words want and need interchangeably. How often do you think about what you “want”? How many times have you said that you “need” something? When you say, “I need some new clothes,” do you really need them, or do you just want them? As you read this section, you’ll find that economics deals with questions such as these.
Wants, Needs, and Choices
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