To understand the term Economic Thinking, you must know what ‘Economics’ means. Economics is the area of study that makes your concept clear about the manufacture, supply, and consumption of goods and services. Now, when you come to “Economic Thinking”, it’s mainly about understanding the root of scarcity problem. This triggers the gap between human needs which are unlimited and the resources which are limited. When you think about the utilization of a product comparing its cost and paybacks generated from it.
Let’s Understand With An Example
In our daily life, we often apply the economic way of thinking. For example, we know that the parking lot is not free of cost. Do you ever thought about why it is so! The answer is just to have control over the usage of the service, as the supply can never meet the demand. People would try to park their cars every now and then making the places overcrowded. Not only that, if parking was free of charge, there would be less tendency to availing public transport which would affect nature in greater terms.
Finding it difficult to understand? Well, now think about you have visited a restaurant and looking at the menu card you are super excited. You ordered food and found it not up to the mark compared to the price of food there. Later on, you came to know about another restaurant where the prices are a bit high but you can afford it. At the same time, the taste is also nice and the services were good enough. Hence, you will surely go for the second one if you think economically as it means not being a miser. It’s all about the utilization of your fund within affordability.
Seven Principles To Influence Economic Thinking
If you go deeper into Economic Thinking, you will find seven principles that influence the economic way of thinking.
Scarcity Forces Trade-offs Principle
This principle tells us about the breach between unlimited want and limited resources. It states that you will make choices when you will find the resources are limited and this will make you face the trade-offs.
You always tend to go for that option which costs less than the benefits you are provided with from it.
It states about that indecisive moment when you can’t make out which one to choose between a little more and a little less.
Incentives-Matter Principle In Economic Thinking
It’s a common nature of people to be responsive to incentives.
You have to find out the skill set or the area where you are best at and then think about trading with others.
Markets are always best at coordinating the interests of buyers and sellers.
You will decide today and it will have a farfetched consequence.
Economic Thinking: Last But Not The Least
However, though it’s an in-depth study material, we often use the way of thinking economically without knowing the nitty-gritty of this area as a subject. Economic thinking enables you not only to cut short your budget; rather, it helps you to utilize your money.