What’s it: Wants are hopes to have or fulfill something. If we want something, we expect to be able to buy it and have it. It’s a felt need shaped by our knowledge, culture, personality, marketing, and preferences.
Unlike needs, wants are less essential for us to survive. At most, we are only disappointed if we don’t fulfill it.
Then, needs become wants when directed to certain objects that we think can satisfy our needs. And, usually, it depends on the resources at our disposal.
For example, we want luxury items such as sports cars or private jets. It becomes a desire because we currently do not have adequate resources (money). And, we can fulfill it if we have enough money.
What is the difference between needs and wants?
Needs and wants are two different words but are often difficult for us to distinguish. As a result, the two may often be misunderstood, especially when we are buying products. Hence, we may spend more money to buy what we want, even though they are not what we really need.
And, for such reasons, identifying needs and wants is important. Choosing and prioritizing our needs and our wants is a way to allocate expenditures optimally. So, we can be wiser in spending money.
Let’s focus on three aspects to distinguish between needs and wants.
First, needs are essential for our survival, but wants are not. For example, we need food, drink, and clothing to sustain our life. Then, we want a smartphone, but really, it’s not as essential as food, drink, and clothes.
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In other words, wants are usually not our primary needs. They are non-binding, and we don’t have to fulfill them right away. They are more complementary when our basic/primary needs have been met.
Needs should account for most of our expenses. They become a regular expense because without them we cannot live and work. In contrast, wants should account for a small portion of our expenses. They help our lives to be more comfortable, although without them it is also fine.
Second, needs are limited in nature. They are more countable than wants.
On the other hand, want is limitless. We are rarely satisfied with what we have and always strive for more. It is about our personal choices and part of our nature as human beings.
For example, when we have more money, we don’t just buy clothes. But, we choose something more luxurious, for example, because it supports our style.
Third, needs have functions and benefits to measure their fulfillment. For example, we need food, so we don’t starve to death. And, that goes for everyone.
Meanwhile, there is no definite standard to measure whether the want has been fulfilled or not. It depends on taste, which varies between individuals.
Take food, for example. Simple food is enough to meet our needs for energy, protein, and minerals. But, once we have more money, we are more likely to choose food with the best ingredients and quality.
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What is the connection between wants and economics?
Economics deals with scarcity, which arises because our needs and wants are unlimited. Meanwhile, our resources are limited.
We are never satisfied with what we have. And it is often correlated with income or money (the resources we have). For example, we want a motorcycle. So, once we have enough income, we buy it. But, after that, we might want a car because it’s more comfortable. And so, after buying a car, we might want a private jet.
Faced with scarcity, we must decide how to allocate existing economic resources to meet our needs and wants. Then three basic economic questions arise to be answered:
- What goods and services do we produce?
- How do we produce them?
- For whom is their production?
And, every choice we make involves an opportunity cost. If we choose to allocate resources to a particular purpose, we sacrifice the next best alternative. For example, if we choose to buy a car, we miss the opportunity to buy a house because we can’t afford both with the money we have.
What are some examples of wants?
A want varies between individuals. It depends on the resources we have. For example, we want items like:
- Computer
- Car
- Private jet
- Smartphone
- Diamond necklace
In general, such items are not necessary for survival, unlike food, drink, or clothing. They can be a wish because we don’t have them yet and can’t afford them. We don’t have enough money.
Although less essential, fulfilling wants help us live more comfortably. By buying or using them, we can have fun or enjoy life. A good example is traveling. We can live without it, but we enjoy life more when we fulfill it.
Needs and wants will not be the same between individuals. For example, a laptop can be a need for a student. But, buying it may be a desire for factory workers.
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Likewise, we, for example, need a car to transport us to work. We need it to go to and from work every day. If our office is far away, buying a high-powered car at an expensive price can become a need. But, if our office is near, buying it can be a want because a more affordable car is actually enough.
How does business play a role?
Businesses operate to fulfill our needs and wants. Without them, we have to do it ourselves to get what we want and need. And we have to return to the traditional economy.
Businesses produce goods and provide services to satisfy our needs and wants. It makes our life easier. We just give up enough money to get what we want without having to bother producing it ourselves.
- Goods represent tangible products. We can see and touch them. Examples are food, drink, clothing, and smartphones.
- Services represent intangible products. They have no physical substance. We can only feel the benefits without being able to see or touch them. An example is what barbershops, banks, insurance, and consultants provide.
Then, there are many businesses around us. They offer the same products and target consumers. As a result, they compete with each other.
The competition requires businesses to be more efficient and innovative. By doing so, they should be able to outperform their competitors. If successful, they can earn more money.
And, as consumers, efficiency and innovation bring great benefits to us. That should lead to cheaper and more varied products.
In addition, efficiency and innovation make ours wants more affordable. For example, in the past, buying a laptop might just be a desire. Still, competition has made the price more affordable, and it is no longer a want but a necessity.
Another example is the camera on a smartphone. In the past, we had to buy and couldn’t get both at once. We have to buy a camera and cell phone separately. Now, because of innovation, we can get both at once and even with high resolution.
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What to read next
- What is the Difference Between Needs and Wants?
- Economic Problem: Definition and 3 Basic Questions
- Scarcity in Economics: Meaning and Explanation
- Economic Resources: Definition, Types
- Needs: Definition, Example, Type
- Wants: Definition and Examples
- Choices in economic: Meaning, Importance, Reasons
- Opportunity Cost: Meaning, Importance, Examples
- Economic Efficiency: Meaning, Prerequisites, Why It Matters
- How are Economic Resources Allocated?
- Why Are Economic Resources Scarce?
- Why is Money Not an Economic Resource?
- Does Scarcity Only Work For The Poor? What Causes Scarcity?
- What Are the Consequences of Scarcity in Economics?
- Three Basic Economic Questions and Resource Allocation
