Economics Basics - Utility and Choice

This video focuses on two fundamental economic concepts, utility and choice, these concepts form the basis of all economic theory. Many economic 101 courses focus on demand, supply, price and equilibrium. Before we can look at these concepts, it is important to understand what drives them.

Utility is the satisfaction derived from any activity. It can be positive (enjoyable) or negative (not enjoyable). Everyone is faced with decisions that affect their overall utility. In order to gain utility sometimes we have to sacrifice utility. The video provides an example of a person on an island who gains utility from relaxing and eating coconuts. To obtain coconuts, the person is required to collect coconuts. Coconut collecting has been assumed to be an activity that produces negative utility. In order to enjoy time spent relaxing the person requires food (coconuts). Therefore, to maximize utility the person must collect coconuts even though this task by itself reduces utility.

This is just the first in a series of basic economic videos. I will be uploading more videos in the coming weeks.

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