The Economic Way of Thinking - Essay Example

? The Economic Way of Thinking The Economic Way of Thinking Introduction Economics is part of social sciences that concentrates on the selections individuals make. Economic thinking is ubiquitously suitable and always practicable; it can be employed by any culture or age group, in any context or situation. The perceptivity it furnishes is powerful and can assist even very juvenile students add up of the sometimes bewildering world surrounding them. Economics maintains that individuals make selections on the basis of their perceptions of what could be beneficial to them. The instruments of economic thinking assist individuals in understanding what determines the perceptions of alternatives faced by individuals (Boettke, Heyne & Prychitko, 2006). The choices individuals make among the provided alternatives reveal their discernment of the benefits and costs to them of the options faced by them. The centrality of apprehending human behavior resides in discovering incentives. These incentives can be punishments or rewards that affect the actions of people. The changes in these incentives change the behavior of individuals in foreseeable ways. Therefore it can be said that economics relates with human actions, the way they respond to situations and the way the actions of different individuals are aligned in society. Whilst some people consider economics to be only associated with stock or money markets, the discipline renders deeper perceptivity. There are a number of principles that can be considered to fundamental to economic thinking and can help in understanding the way humans behave, public policy matters and markets. Moreover, prices and markets coordinate with each other in influencing the human behavior. Discussion Thinking economically provides a perspective on social transactions and human decisions. It can be summarized as the perspective that egresses from the supposition that all kinds of social processes consequence from interactions amongst the selections made by individuals after estimating the anticipated costs and benefits their choices inherent. This view is particularly useful when applied to explain the functioning of predominately neutral network of dealings that are referred as simply economy or the market system. Economics basically deals with the reality of scarcity that makes individuals to pick amongst various alternatives since there is a competition over scarce resources amongst individuals as the services and goods are desired in much greater quantity than they are available in the nature (Slesinger, Gilbertie & Tarullo, 1993). Being human, people desire for services and goods is virtually limitless. But this unlimited desire cannot be furnished, due to the presence of constraints that restricts our ability to fulfill our wants. Scarcity is said to be there whenever the resource or good desired is available in lesser amounts in nature than the amounts required or desired by people. However, there exist few resources that are not scarce like sea water as it is less required than its availability but everything else is less than what is required by people even the time is scarce too. Economically a good may be considered as scarce even if it has been produced in greater quantities as long as it is not provided by nature in quantities required by all individuals. Such as automobiles and apples that can be seen in abundance in United States but still they are scarce because we’ll need more than what has been provided by the nature (Giesbrecht & Clayton, 1997). This concept of scarcity makes people to choose amongst the options provided such as a student may consider deciding between studying for an hour and watching a movie for the utilization of his time. And these choices are the outcome of the scarcity. These choices can be based on intuition but economics calls for rationality. Rationality requires that while deciding the associated benefits and costs of a decision should be compared and whenever a choice is made, it consequences from the tradeoff. As in order to put one option and set aside others, one has to go through the process of fulfilling one desire at the cost of other. This tradeoff renders the foundation of economic analysis. Now what is humans need are categorized as resources. These are the inputs or ingredients that are employed by individuals to produce services or goods (Heyne, 1997). Resources are the ingredients, or inputs, that people use to produce goods and services. The utilization of these resources is based on the capacity to produce which in turns determines how much of a service or good can be generated. People are there on both sides of the chain that is from production to the consumption. Therefore the people in power may manipulate the supply and increase the scarcity of a good for their own benefit while they may release the supply and make sound availability to people for their benefit. These are all based on the economic reasoning. Individuals acting as producers, savers, workers, consumers, investors and citizens may respond to the incentives available to utilize the scarce resources in such ways that will render them the greatest possible benefits to them and these choices inherent consequences that result in the present as well as in the future. However, the choices made by firms, individuals or government officials usually cause long-run unintended outcomes. These choices can be manipulated by providing incentives as individuals choose the alternatives that will benefit them the most. The decision making is not on the basis of total benefit but it entails benefit on marginal basis (Raghavan, 2010). Summary The economic reasoning basically entails the way humans behave rationally while deciding amongst alternatives available. This helps in predicting human behavior in different situations. The main aspects of economic reasoning include that people have to choose because the resources available are in scarce quantities than they are required. These choices are therefore based on benefits and costs associated with their choices. Thus individuals have to tradeoff between various alternatives available. Moreover, the choices of individuals can be manipulated by providing incentives. These incentives may help in framing the response of people in desired ways. Economic systems are created by individuals that influence enticements and choices of individuals and individuals profit when they engage in trade keenly. In addition, the selections individuals make have substantial impact on their future. References Boettke, P. J., Heyne, P. T. & Prychitko, D. L. (2006). The Economic Way of Thinking. Pearson Prentice Hall. Giesbrecht, M. G. & Clayton, G. E. (1997). A guide to everyday economic thinking. Irwin McGraw-Hill. Heyne, P. T. (1997). Economic Way Thinking. Pearson Education Canada. Raghavan, V. P. (2010). Managerial Economics: The Economic Way of Thinking of Managerial Decisions, Theories, Applications and Cases. Kunal Books. Slesinger, R., Gilbertie, J. L. & Tarullo. (1993). Economic Way of Thinking. CAT Publishing Incorporated. Read More