Three Fundamental Concepts of Economics

3466 WordsJul 16, 201114 Pages
1. Human wants.—Two characteristics of human wants possess great importance in their bearing upon the production and consumption of wealth. First, there seems to be no limit to the number of wants of which a human being is capable. This is one reason why most people find saving so difcult; any growth of income is speedily outdistanced by the growth of wants. This characteristic also ex-plains why a general overproduction of wealth is impossible; there may be too much of one thing but not too much of all things. It also accounts for the al-most infinite variety of goods found in the markets of any modern city. Second, the continued gratification of any single want finally leads to satiety and may become even tedious and irksome. It is…show more content…
We will not undertake to discuss all these problems in this chapter, but will be satisfied with an examination of the terms demand and supply. 4. Analysis of demand.—The desire for a commodity is not in itself an economic demand for it. No matter how much a man may want an automobile, his desire can have no effect upon the prices or value of automobiles unless be has the necessary means of payment. Desire must be accompanied by the necessary purchasing power before it can become economic or effective demand, or have any influence in the market. The second point to notice in connection with demand is that it varies with the price. For example, if the price of automobiles and. the cost of operation could be cut one-half, there would undoubtedly be a great increase in the demand for automobiles and many more cars would, be made and sold. On the other hand, if any conditions cause the prices of automobiles and gasolene to be advanced, the tendency will be toward a weaker demand and smaller sales. Hence when we speak of the demand for any article, manifestly we must always have in mind a certain price, for the demand varies with the price. There is only one way of measuring the demand for an article at any given price, and that is by the quantity of it which is sold at that price. That shows how many people are willing to buy at such a price. Hence it is possible for us to define demand as being the amount of goods which people
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