BCom 1st Year WANTS in Business Economics Notes Study Material
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BCom 1st Year WANTS in Business Economics Notes Study Material
The dictionary meaning of the term ‘want’ is need or desire. Robbins uses the term “ends’ which may be taken as its equivalent term.
In economics, wants are not mere desires for a thing but something more than that because “if wishes were horses, beggars might ride.” Want is desire backed by purchasing power. In other words, along with the desire for a thing, there should be capacity in terms of money or wealth to acquire the thing needed.
Wants are the mainspring of all human activities. Uncivilized society’s wants were very limited, perhaps not many more than those of the brute animal. But every step in the man’s progress upwards increases the variety of his wants. “He desires not merely larger quantities of the things he has been accustomed to consume, but better qualities of those things; he desires a greater choice of things, and things that will satisfy new wants growing up in him.”
It was man’s wants in the earliest stages of his development that gave rise to his activities. But afterwards development of new activities gave rise to new wants, rather than new wants giving rise to new activities.
Wants and efforts and activities supplement one another; either is incomplete without the other. As McCulloch said, “The gratification of a want or a desire is merely a step to some new pursuit. In every stage of his progress man is destined to contrive and invent, to engage in new undertakings; and when these are accomplished to enter with fresh energy upon others.” Satisfaction of every lower want in the scale creates a desire for want of a higher character. This can be put in a different way like this: the satisfaction of a lower want permits a higher want to manifest itself.
Characteristics of Wants
Though human wants and desires are countless in number and various in kind, still they show some well-marked features. The following are important characteristics of wants:
(i) Human wants are limitless: Human wants keep on multiplying in a never-ending cycle. As soon as one want gets satisfied, another one appears and this process goes on in a never-ending cycle. In other words, satisfaction of one want leads to the emergence of fresh wants.
(ii) A particular want can be satisfied: Though wants taken together are unlimited and all of them cannot be satisfied, it is not true of any particular want. A particular want is satiable. If one is thirsty, one can quench one’s thirst. A hungry person can satisfy his hunger. A naked person can cover his body with cloth. But taken together, all wants cannot be satisfied at the same time. On this characteristic of want is based the law of diminishing marginal utility, also known as the First Law of Gossen.
(iii) Some wants are competitive: Some wants are such that they can be satisfied either with this commodity or that. The desire for hot drink can be satisfied either by tea or coffee. This characteristic of want is the basis of the law of substitution.
(iv) Some wants are complementary: If in order to satisfy a want, two or more commodities are needed together, it is a case of complementarity. If we want to write, we need paper as well as pen. If we want an ink pen, we also need ink. In the theory of consumer demand, competitive and complementary nature of the commodity has a great significance.
(v) All wants are not equally important: All wants are not felt with equal intensity and urgency. In the scale of preferences of a consumer, wants are capable of being placed according to their intensity of desire, most intense want coming first and the least intense occupying the last position. Choice depends on this characteristic of wants.
(vi) Wants recur: Most of our wants, and nearly all of those which refer to the necessaries of physical health and comfort, are not “once-for-all” wants, but need to be gratified hour by hour or moment by moment. Such wants are repetitive, they recur. “To keep our wants satisfied, we need a flow, that is, 80and-so many pounds, pints or what not each day.” The want, does not matter how many times it has been gratified, continually reawakens and each time a fresh unit of goods concerned is needed. Thus goods are needed in a flow to satisfy wants. ..
(vii) Different wants can be resolved into a single want: Our wants are diverse like the things that satisfy our desires. Our wants for all the different sorts of things, in the last analysis, can be resolved into a single want of some kind of service. “Indeed it can be argued that what we ultimately want is always some kind of service, to be warmed, nourished or entertained, and so on and that tangible goods are merely a source or store of such services.”
(viii) Larger quantity means greater satisfaction of wants: The bigger the flow of goods, the higher the degree to which wants are gratified. “To receive five ounces of tea a week is better than to receive four ounces, six ounces is better still, and so on.”
(ix) Wants tend to vary with time, place and person: Not only different wants are felt with varying intensity by the same person, intensity of the same want varies with different persons. The intensity of want for wheat, for example, is different for those living in the Punjab from those living in Assam. It also follows from this that wants vary according to place. Time also influences the intensity want. We may want rice very intensely at lunch time, but not with same intensity at dinner.
(x) Civilization, urbanization, income and advertisement influence wants: With the progress of civilization, our necessities increase and so our wants. Civilization has also led to growing urbanization. Urban people feel more wants than those living in rural areas. Similarly, with rising per capita income our wants multiply. This would be clear when we compare the wants of average Americans, for instance, with those of the average Indians.
Advertisements enlarge our consumption basket by informing us about the existence of newer items of consumption. This leads to an increase in wants.
(xi) Present wants are preferred to future wants: Uncertainty and unpredictability are associated with future. So there is preference for the present. As such, people prefer present wants to the future ones. This characteristic of want is the basis of the Austrian Time Preference (Agio) Theory of Interest.
Classification of wants
Wants can be classified into absolute and relative, higher and lower, urgent and capable of postponement, positive and negative, direct and indirect, general and particular, constant and interrupted, permanent and temporary, ordinary and extra-ordinary, present and future, individual and collective, private and public. A close look at this classification makes it clear that most of above divisions of wants, in fact, only reveal their characteristics.
The useful classification of wants is one that divides commodities and services that go to gratify our wants into the following three classes:
- Comforts; and
Necessaries: Those commodities and services which are essential for men are known as necessaries. Necessaries are divided into the following three sub-classes:
(a) Necessaries for Existence: These are commodities without which our very existence will be at stake such as minimum amount of food, clothing and shelter.
(b) Necessaries for Efficiency: When the needs of bare existence are fulfilled, some commodities and services appear as necessaries to maintain good health, acquire the three R’s and minimum clothes according to seasonal requirements.
(c) Conventional Necessaries: Some commodities and services become essential because of social customs and rituals and by force of habits.
Comforts: After meeting necessaries, people have a strong desire for things that offer comforts which lead toward a fuller life. A student who has to cover a distance of 3 to 4 km every day to attend school will need a bicycle as a comfort.
It will not only save time but also cause less loss of energy. This will enable him to study for longer hours.
Luxuries: Since wants are unlimited, men begin to desire luxuries after fulfilling comforts. Luxuries are also known as elitist goods. The income elasticity of demand for luxury goods is greater than unity, It means that the demand for such goods increases proportionately more than the increase in consumer’s income.
Relation between necessities, comforts and luxuries: These three categories of wants are not entirely exclusive classes. It is difficult, for instance, to make a clear distinction between necessaries for efficiency and comforts. We gave the example of bicycle above. Is it a comfort or necessary for efficiency?
In what category should we put a car? It may be a luxury for a student, but a comfort to a college teacher and a necessity for a busy doctor. With the rising income, a commodity changes its characteristic. Electronic goods which were luxuries some years back are today items of comforts and may be reckoned as necessaries tomorrow.
Whether a commodity is a necessity, comfort or luxury depends on many factors like climate, progress of civilization, level of income, nature of occupation, social customs and so on. Hence these are relative terms.