Economic
decisions are those decisions in which people (or families or countries) have to choose what to
do in a condition of scarcity. Scarcity occurs because people have unlimited wants but only
have limited resources with which to fulfill these wants. This means that people have to make
economic decisions because they want more things than they can actually get. Therefore, they
have to choose between various options.
An individual person has to make
economic decisions. You might have to decide which pair of jeans to buy, or how many pairs of
jeans to buy as opposed to how many shirts. You may have to decide whether you will go to a
university or whether you will go straight into the labor force. You may have to decide whether
you should buy the newest mobile phone or keep your old one a while longer.
Families have to make essentially the same kinds of decisions. A family might have to
decide how many pants and shirts their children need. They might have to decide how often (if
at all) they can go on vacation. If they decide they can go on vacation, they will have to
decide where they want to go and how much they want to spend on souvenirs while they are there.
They may have to decide what car they can afford and when to replace it with a new
one.
Countries have to make bigger decisions. They have to decide what level
of taxation they will impose on various types of economic activities. They have to decide how
much they will spend on their military as opposed to domestic programs. They may have to decide
what economic activities they want to subsidize.
All of these are decisions
that have to be made because people (as individuals or as groups of people) want many more
things than they can have and therefore must choose between various
alternatives.
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