The Universal Problem: Unlimited Wants vs. Finite Resources | Economics SHS 1 SEM 1 WEEK 1 (WASSCE & NaCCA Aligned)

The Fundamental Principle: Scarcity and Choice

The study of human behaviour regarding resource management begins with a single, unavoidable truth: the world is characterized by scarcity. This is not just an issue for the poor; scarcity affects everyone, including the richest societies and individuals. Scarcity exists because human wants—our desires for goods and services—are virtually unlimited, yet the resources available to satisfy those wants are finite. Every time a choice is made, it confirms the existence of scarcity.

• Wants vs. Needs: Wants are desires that provide satisfaction (e.g., a new SUV, a second house). Needs are necessities required for survival (e.g., food, shelter). In economics, we often treat them as interchangeable because once basic needs are met, the drive for additional wants continues, always exceeding the available capacity to satisfy them.
• The Core Economic Problem: When resources are scarce and wants are unlimited, a decision must be made about how to allocate those limited resources. This act of allocation is the foundation of economic thought.
• Resources (Factors of Production): These are the inputs used in the production of goods and services. They are categorized as Land (natural resources like Ghanaian cocoa fields or mineral deposits), Labour (human effort, like a mason or a teacher), Capital (man-made tools and machinery, like factory equipment or fishing nets), and Entrepreneurship (the skill and risk-taking needed to organize the other three factors).

Defining the Discipline and its Objects of Study

At its highest level, the subject is defined as the social science that studies how individuals, institutions, and societies make optimal choices under conditions of scarcity. It is fundamentally about how we manage the allocation of scarce factors of production to produce goods and services for consumption.

• Goods: Tangible items that satisfy human wants. Examples in Ghana include a locally woven Kente cloth, a box of frozen chicken, or a newly constructed apartment building.
• Services: Intangible actions or activities performed for others that satisfy wants. Examples include receiving a haircut at a salon, being taught by a university lecturer, or utilizing mobile banking features.
• Economic Agents: The primary decision-makers in any economy. These include Households (the consumers and resource owners), Firms (the producers who transform resources into goods/services), and Government (the regulatory body that sets rules and provides public goods like roads and national security).

Two Windows of Analysis: Micro and Macro

Economists approach the world using two primary analytical lenses, based on the scope of the problem being studied. Understanding this distinction is crucial for interpreting economic news and policy.

• Microeconomics: The study of decision-making by individual economic agents—households, firms, or specific markets. It focuses on specific elements within the economy. For instance, analyzing why the price of plantain dropped sharply in Makola market this month, or determining whether a single banking institution should merge with another. The ‘micro’ view is like examining the individual trees in the economic forest.
• Macroeconomics: The study of the economy as a whole or its major aggregates. This concerns variables like national output (Gross Domestic Product or GDP), overall employment levels, inflation (the general increase in prices across the nation), and the overall growth rate of Ghana. When the Bank of Ghana discusses the national interest rate, it is engaging in macroeconomics. The ‘macro’ view examines the entire economic forest and its health.

The Language of Inquiry: Positive vs. Normative Statements

Not all economic claims carry the same weight. Professional economists strive for objective analysis, separating factual observations from subjective opinions or recommendations.

• Positive Economics: Focuses on objective facts and cause-and-effect relationships, often expressed as “what is.” These statements are testable and can be confirmed or refuted using empirical data. Example: “If the government raises the Value Added Tax (VAT), consumer spending will decrease.” This is a verifiable hypothesis.
• Normative Economics: Incorporates value judgments and subjective beliefs, often expressed as “what ought to be.” These statements are prescriptive and cannot be proven true or false purely through data. They involve ethics and policy goals. Example: “The government should provide larger subsidies to local rice farmers to ensure food security.” This statement reflects a policy preference, not a verifiable fact.

The Economist in Ghana: Career Pathways

An economist is a professional who applies quantitative data and theoretical models to understand and influence the processes of production, distribution, and consumption. Their expertise is highly valued across the private and public sectors in Ghana.

• Public Sector Roles: Economists are central to national planning, working at institutions like the Ministry of Finance, the Bank of Ghana (BOG), the Ghana Statistical Service (GSS), and the National Development Planning Commission (NDPC). Their roles include forecasting inflation, drafting national budgets, and advising on trade policy.
• Private Sector Roles: In the private sphere, economists serve as market analysts, investment bankers, financial consultants, and risk managers. They help corporations, such as telecommunications firms or major construction companies, make strategic decisions regarding pricing, market entry, and resource mobilization.
• Academia and Research: Economists also conduct vital research at universities and think tanks, providing evidence-based analysis crucial for long-term national growth strategies.

NaCCA ALIGNED
For Teachers: Premium Prep Package. For Students: Premium Handouts.