The study of economics begins with understanding of human “wants”. Scarcity forces us to economise. We weigh up the various alternatives and select that particular assortment of goods which yields the highest return from our limited resources. Modern economists use this idea to define the scope of their studies.
Although economics is closely connected with such social sciences as ethics, politics, sociology, psychology and anthropology, it is distinguished from them by its concentration on one particular aspect of human behaviour – choosing between alternatives in order to obtain the maximum satisfaction from limited resources. In effect, the economist limits the study by selecting four fundamental characteristics of human existence and investigating what happens when they are all found together, as they usually are. First, the ends of human beings are without limit. Second, those ends are of varying importance. Third, the means available for achieving those ends – human time and energy and material resources – are limited. Fourth, the means can be used in many different ways: that is, they can produce many different goods. But no single characteristic by itself is necessarily of interest to the economist. Only when all four characteristics are found together does an economic problem arise. Resources: The ingredients that are combined together by economists and termed economic goods i.e. goods that are scarce in relation to the demand for them.
(i) Economic Goods: All things which people want are lumped together by economists and termed economic goods i.e. goods that are scarce in relation to the demand for them.
(ii) Free Goods: These are goods which people can have as much as they want, e.g. air, sunlight, moolight.