Unit 1
Unit 2
Introduction to Economics
Needs and Wants
The first thing that anyone studying Economics needs to be able to do is to distinguish between needs and wants. We buy things every day – some of them are things that we need, while others are things that we want.
A need is defined as something that is essential for our survival. There are certain things which obviously come under this classification. For example, water is a “need” for all people living on this planet. Other things are not quite as obvious. For example, which of the following things would you classify as being essential to our survival?
- A car
- A mobile phone
- Clothes
- McDonalds
- Education
There is no definitive answer to this question – it will depend on how you define “essential”. While we can say that McDonalds is certainly not a “need”, we would certainly all agree that food of some sort is a need. People survived for thousands of years without cars and mobile phones, and so the odds are that we could do so again.
The concept of education as a “need” is an interesting one. Could we survive in Australia today if we had no education at all? The lack of schooling might make it impossible to get a job, and this might mean that you can’t afford to eat or find shelter. Eventually this might prove disastrous. Despite this, there are people all over the world who never have the benefit of formal schooling. This suggests that the concept of essential could vary based on your location. It could also change over time.
On the other hand, a want is something that we would like to have, but which we could survive without. You might want to eat McDonalds for dinner, but you could survive without it if you had something else to eat. As people become wealthier, they will find that all of their needs are satisfied. At this time they will begin to satisfy their wants. In other words, once we have food, shelter and warmth, we can buy a television!
It is important to note that needs and wants apply to both goods and services. A good is a physical item that we can buy, like a computer, a hamburger or a pool table. A service is when another person completes a task for us. For example, when you get your hair cut, the hairdresser is performing a service. Other examples include legal services and tax returns.
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