I learned a little bit about economics at university, and the thing that I learned is that economics is based on scarcity, which means that we have infinite wants, but what we need is finite.

    This also reflects the 4 factors of production which are also finite and this also means that no matter how much production you make, the economy will be fluctuating every now and then, even if you make changes to increase more productivity like installing more advanced capital or having a decent enough work force.

    So it makes sense that despite we keep being told that economies should prioritised on increasing more and more as capitalism optimises of selling products and produce more products, this is not exactly accurate because there are bound to be fluctuations in the economy, booms and depressions or inflation and deflation. And this also affects everything else – how value of the currency, how the market is controlled, the costs of living, supply and demand, interest rate and how much money is borrowed from banks and so on.

    But something that I do not understand is this.

    If the one motivation is to keep the economy of every country to rise and boom, and this will also reflect on the cost of living of that particular area because products are being produced at higher costs (unless demand and supply are balanced enough that keeps the price level average), then how come annual incomes rarely change or still below enough that the average person may not be able to pay for everything that needs to be paid in a constant basis like groceries, rent, mortgage, utility bills and so on?

    If things like mortgages or rent prices are increasing while wages stay roughly the same, even if the economy of a particular area is booming, whether it is the US or a place in Europe or somewhere in Asia, what is the science behind this?

    Is there a valid reason why this is the case?

    What is the science that explains why there are intentions to keep economies to rise and boom with costs of living are also just as high yet wages remain mostly unchanged to pay for the expenses that need to paid?
    byu/sammyjamez inAskEconomics



    Posted by sammyjamez

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