Mastering Mental Models The economics of everyday life This article kicks off by exploring some of the foundational economic principles — ones that help us navigate resources, desires, and choices. At the heart of economics is scarcity. Much is based on the fact that while human desires are limitless, our resources are finite. Picture a single pizza at a large party: its limited quantity boosts its value, and to make the most of it presents a number of challenges. How do we decide the best way to allocate limited resources like time, money, or materials? Scarcity often drives innovation as people find ways to stretch resources or curb demand, but it’s worth noting that technology rarely erases scarcity entirely. Supply and demand are closely connected to scarcity, as the push and pull affect not just prices but also the flow of resources, determining who can access what. It’s a self-regulating process, and a good example is the challenges brought on by the COVID-19 pandemic, whic...