These two fundamental problems provide a foundation for economics:
• Society’s wants are virtually unlimited and insatiable.
• The resources for producing the goods and services to satisfy society’s wants are limited or scarce.
What do we mean by “wants”? We mean, first, the desires of consumers to obtain and use various goods and services that provide utility that is, pleasure or satisfaction. These wants extend over a wide range of products, from necessities (food, shelter, and clothing) to luxuries (perfumes, yachts, race cars). Some wants—basic food, clothing, and shelter—have biological roots. Other wants—for example, the specific kinds of food, clothing, and shelter we seek—are rooted in the conventions and customs of society.
Over time, wants change and tend to multiply, fuelled by new products. Not long ago, we did not want personal computers, Internet service, digital recorders, lattes, or pagers because they simply did not exist. Also, the satisfaction of certain wants tends to trigger others.
Services, as well as products, satisfy our wants. Car repair work, the removal of an inflamed appendix, legal and accounting advice, and haircuts all satisfy human wants. Actually, we buy many goods, such as automobiles and washing machines, for the services they render. The differences between goods and services are often smaller than they appear to be.
Businesses and units of government also strive to satisfy economic goals. Businesses want factories, machinery, trucks, warehouses, and phone systems to help them to achieve their production goals. Government, reflecting the collective wants of its citizens or goals of its own, seeks highways, schools, and military equipment.
All these wants are insatiable, or unlimited, meaning that our desires for goods and services cannot be completely satisfied. Our desires for a particular good or service can be satisfied; over a short period of time we can surely get enough toothpaste or pasta.
But goods in general are another story. We do not, and presumably cannot, get enough. Suppose all members of society were asked to list the goods and services they would buy if they had unlimited income. That list would probably never end.
In short, individuals and institutions have innumerable unfilled wants. The objective of all economic activity is to fulfill wants.