Why Do We Study Economics?

In short, Economics study the optimal allocation of resources. That is, Economists try to find the best way to use what we have. The problem is that our resources are limited, while our needs are most of the times unlimited. For instance, the members of a household earn a certain income (these are the household`s resources) and need to decide how to make the best use of it: buy groceries, pay for kids` education, plan holidays, savings, etc. Although they would like to satisfy all their needs the cannot spend unlimited amounts of money, so they have to sacrifice some holiday trips to afford university tuition fees. Similarly, the UK government collects tax revenue and has to optimally allocate it in healthcare, in building roads, in national security etc. Businesses also employ workers and use equipment to produce and sell their goods using the revenue to pay their workers and make a profit. They need to decide how many workers and how much equipment they need and they can afford to employ in order to make the best product and make a profit. Another example is when we want to cook the most tasty meal with the few groceries that we have in our fridge. It might be the case that we do not have the necessary ingredients to cook our favourite meal, but we still need to cook something as tasty as possible given the ingredients that we have.

All these examples illustrate the core concept of Economics: limited by the resources that we have, we need to satisfy as many needs as possible.