Fascinating economy

Tag has no winner because there is no rule that states when the game has to end. A game of tag does not end when somebody wins. It lasts until all the players decide to stop playing. Technically, a game of tag could go on forever. The same is true for economics.

Winners often get medals or trophies to show that they have won.

The Features of Games

To study economics, you need to understand how the various features of the game work. This means knowing about the different roles of the players and the rules they have to obey. It also means knowing about outcomes and understanding the properties that affect the way the game is played.

Economics is like a game. It has many of the attributes that all games have in common: players, rules, properties, and outcomes. But what kind of game is it? What do the players do?

Surprisingly, the answer is simple: Economics is a game in which players buy and sell goods and services. It has rules, properties, and outcomes that limit and direct how all that buying and selling takes place.

Goods and Services

Objects that fulfill someone’s needs and wants are called goods. You need food. A sandwich is a good that fulfills that need. Every time you buy a sandwich, you are a player in the game of economics.

What about things you want? Do you want to surf the Internet? A computer fulfills that want. A computer is a good. A DVD fulfills the want for entertainment, so it is a good, too. Just about every object fulfills some need or want.

All foods are goods, even if they do not taste good.

Sometimes our wants and needs cannot be fulfilled by goods, or objects. In that case, we might require a service. Services are actions or other types of assistance that customers need and want.

For example, when you need a trim, or you want to change your style, you get a haircut. But a haircut it is not an object. It is a service. Someone with a specific skill works to give you the trim you need or the style you want. Your stylist performs an action, or a service. However, he or she makes use of goods, such as scissors and a comb, to perform the service.

Giving someone a haircut is a service that requires goods like scissors and a comb.

Is Economics About Everything?

Not everything is a good or a service. For instance, when you pay someone to mow your lawn, you are buying a service. But when you mow your own lawn, you are just making the grass shorter.

In other words, an action that you perform for your own benefit is not a service. If you read a book, you are not doing anybody a service. You may be relaxing or learning. These are good things, but they are not services because you do them for yourself.

On the other hand, if you read a book out loud to somebody else, you are performing a service. A service is still a service even if someone offers it for free, but services rendered generally involve the exchange of money. The exchange might also be made using the barter system.

What Is Production?

Goods and services need to be made. This is known as production. Production is one of the things certain players in the game of economics do. A player who does this is known as a producer.

Production does not just happen. There are required to produce goods and services. Something needed for production is called a resource.

For example, you need flour to make a cake. The cake is a good, and the flour is a resource. Where did the flour come from? Originally, it came from a wheat field. So, the wheat field is a resource, too.

What It Takes to Make a Birthday Cake?

Let us say you want to make a birthday cake for someone. That is a service. It takes action to make a cake, and this action is valued. And it produces a good – a birthday cake. One of the main services in any economy is making goods. This service, called production, requires all kinds of resources. To make a cake, you need a kitchen. A kitchen is a resource.

Of course, you also need the stuff you make the good out of. If you are making a cake, you need flour and eggs and sugar and everything else in the recipe. These are some of the resources you need to make the cake. But you also need bowls, spoons, measuring cups, and a pan. These are resources, too. And finally, you need time and knowledge. In the end, you will put in a lot of effort. All of these things – time, knowledge, and effort – are resources.

Even a genie, who can make a birthday cake out of thin air, has to do something. Maybe the only action they have to take is saying, «Abracadabra.» But that still takes up the genie’s time and requires genie powers. Time and genie powers are resources. Even a genie needs some resources to produce a birthday cake.

Allocation

Resources are essential for production. But very few resources are easily available and ready to be used. Resources need to be found and set aside to produce specific goods. That is known as allocation.

Allocation involves making decisions. If you have a bag of flour, you have to decide whether you want to make cake or bread. That is a decision about the allocation of this resource.

Economics is a game of constant decision making. A lot of these decisions have to do with allocation.

Making decisions about how to allocate resources is part of many games, not just economics. A softball coach allocates players by deciding who plays what position and making the batting order.

What will you do with your flour?

Distribution and Consumption

Economics is about the allocation of resources to produce goods, but what do we do with these goods once they are produced? We use them, of course.

Using a good or a service is known as consumption. In the game of economics, people consume goods that are produced. When a player uses a good or service, he or she is known as a consumer.

Goods are rarely produced where they are used. If you have a piece of clothing with a label that says «Made in China,» it had to travel a long way to get to you.

Moving goods to consumers is known as distribution. Producers have to distribute goods to the people who want to consume them. Resources get distributed, too.

Perhaps you want to bake a friend a birthday cake, so you buy a bag of flour. Think of all the distribution the flour has to go through to get to you:

It starts out as wheat in a field far away. After harvest, it is sent to a flour mill. This takes resources, such as a truck, gasoline, and a driver. When the milled flour gets loaded onto another truck to be shipped to a warehouse, it takes more resources. From the warehouse, the flour is loaded onto more delivery trucks and taken to the store, requiring still more resources. Finally, the bag of flour has arrived at the store for you to buy. You become the final stage of distribution when you take the flour from the store to your kitchen.

Producing goods takes resources, and so does distributing them. You need trucks and trains and ships, and they need gas and tires and so on. These resources have to be allocated, as well. So, in addition to the allocation of resources for producing goods and services, economics is also about allocating resources for distribution.

Many goods that we use in the United States are made in other countries.

So, what is Economics About, Again?

You have seen that economics is about producing goods and services for people to consume. You have also seen that production requires resources, as well as decisions about the allocation of these resources. Finally, you saw that goods and resources need to be distributed from where they are produced to where they are used. If you put all of this together, you should have a good idea of what the game of economics is about.

Goals are a big part of economics. They help us avoid uncertainty. Goals also help us make crucial decisions.

Imagine you are playing softball. You know the rules, but you still have many decisions to make. Should you pitch a curveball or a fastball? Should you swing at a ball, or wait for a better pitch? Should you steal second base, or wait on first? Without a goal, it would be hard to answer these questions.

If you have a goal, the answers are obvious. If your goal is to win the game, you know what to do – throw your best pitch, try hard to hit the ball, and steal as many bases as you can without getting thrown out. These are the things that players need to do to win.

Economic Goals

In the game of economics, you need goals to avoid confusion and to know what to do with yourself. Different people have different goals, however. You may think the only goal in economics is to make money, but there are many different goals in economics.

Different economic goals affect how people approach making decisions in the game of economics. If your goal is efficiency, it is likely that you are going to allocate resources for the production and distribution of goods and services differently than a person whose goal is security or freedom.

Read through the list to see the different economic goals that people pursue. Each will be defined in the coming pages.

Goals for Playing the Game of Economics