Four key economic concepts—scarcity, supply and demand, costs and benefits, and incentives—can help explain many decisions that humans make.
Scarcity explains the basic economic problem that the world has limited—or scarce—resources to meet seemingly unlimited wants, and this reality forces people to make decisions about how to allocate resources in the most efficient way.
As a result of scarce resources, humans are constantly making choices that are determined by their costs and benefits and the incentives offered by different courses of action.
While having a basic understanding of economic theory isn't perceived as being as important as balancing a household budget or learning how to drive a car, the forces that underpin the study of economics impact every moment of our lives. At the most basic level, economics attempts to explain how and why we make the purchasing choices we do.
Four key economic concepts—scarcity, supply and demand, costs and benefits, and incentives—can help explain many decisions that humans make.
