Phan Thi Tu Anh 12E10 English for Economics Translation

CHAPTER 1

What is economic? What is the nature of economic system?

What is economic?

Economists offer different opinions, but generally, they all define the concept of
economics in the light of emphasizing issues related to demands, economic scarcity and
reasonable choice of economic alternatives. According to Adam Smith (1723 1790), the
founding father of economic science, economics is the science of wealth. As for Jean Paptiste
Say (1767 1823), economics is the understanding of the rules of governing the formation of
wealth allocation and consumption. Edward and other economists define economics as the
science which studies how the scare resources are used to satisfy peoples needs in society. It is
concerned with major activities of production, distribution and consumption of wealth, and
institutions and act which facilitate these activities.

Needs

Peoples material needs first and foremost and then their social and spiritual needs
demand that needs should be identified and satisfied. These needs may belong to individuals or
groups that change over time and space. Abraham Maslow, a theorist on human needs stated that
human nature is created in such a way that aim to satisfy a hierarchy of needs raging from the
lowest to the highest (self actualization). Primary needs include need for food, drink and
leisure which mean physical needs. The 5th is need to express talent, creativity, power, aesthetic,
strength, also means the highest spiritual need.

In any society, the satisfaction of needs is always limited by personal incomes, economic
resources scarcity and existing standard of the production system.

Scarcity and Economic resources

As we already know, some wealth is provided by Nature with unlimited quantity (the air
for example). Others in general are needed to be impacted by human labor to transform natural
resources into economic wealth. However, both human resource and peoples virtually unlimited
needs (materially and spiritually) created the very cause for economic scarcity.

As the resources are limited, we are forced to make choices when producing goods and
services to obtain maximum profits from what is available to us. However, it is necessary to note
that when we accept one choice, at the same time we have to give up other choices to have other
things. The value of that other thing is the opportunity cost of economic choice made by each
individual among us, or each enterprise, society.