Needs and wants

In economics, a need is understood to be the perception of a deficiency that needs to be eliminated. A need arises from this when the need for a good with which it is to be satisfied becomes concrete and there is a corresponding intention to purchase it. If sufficient purchasing power is added to the intention to buy and becomes effective on the market, this is called demand. If this demand is matched by a corresponding supply, the good can be purchased. Ultimately, the buyer of a good expects to benefit from it, i.e. to satisfy his needs as well as possible.

Here's an example: Hunger is a deficiency. If a person fasts, he or she does not have the desire to eliminate this lack and no need arises from it. If contrary he wants to remedy the lack, the need for food arises. The need for a specific product would then be the need for spaghetti, for example. If the person has enough money and goes to a grocery store to buy the spaghetti, demand for the product arises. If the spaghetti is eaten, it provides benefits in the form of enjoyment, satiety and nutrient supply to the body. In relative terms, it should be noted that the terms lack, need, need and demand are often used synonymously.

In order to structure the multitude of possible needs and to gain mental clarity, their classification is a good idea. Maslow's pyramid of needs is the best-known model for classifying needs. It is based on the assumption that the needs of a 'lower' level must first be largely satisfied before the satisfaction of 'higher' needs is sought.

Here are some examples of goods in the broadest sense to satisfy the needs of the various stages

  • Basic physical needs (also existential needs): food, drink, sleep.
  • Security: home, permanent job, insurance, personal future prospects, religion, personal possession of weapons.
  • Social relationships: Communication, partnership, circle of friends.
  • Social recognition: career, status, power, self-esteem.
  • Self-realization: altruism, individuality, justice, goodness, talent development.

Furthermore, needs can be classified according to urgency. The related distinction into existential needs
and cultural or luxury needs are not clearly defined, but they do provide a good orientation.

A further classification can be made according to individually and collectively evoked needs. Collective needs arise from social life and denote the desire for education, security and a clean environment. Individual-needs concern the wishes and needs of a single person.

If one differentiates according to the desired object for the satisfaction of needs, a classification into material and immaterial makes sense. While the former are closely related to the consumption desires of humans (e.g. possession of a smartphone), immaterial needs such as 'living in an intact environment' or the 'desire for a healthy lifestyle' describe characteristics of human life that can hardly be expressed in prices.

Depending on whether someone is aware of their needs or not, these are open or latent needs.

Normally, in economics, needs are assumed to be basically unlimited (the axiom of insatiability), which is in line with most of the experience in our cultural area. Thus, new goods or higher incomes initially increase the feeling of satisfaction or happiness, but this usually diminishes after a short time due to habituation effects and new (social) reference points, among other things, and leads to new desires. Therefore, people are usually happy about buying a new, bigger, nicer car or house. But after some time the desire for an even better option often arises. In this respect, most people have unsatisfied needs and a sense of scarcity, almost regardless of their assets. This also explains the phenomenon that only very few people consider themselves 'rich', as multimillionaires also have open wishes (new aircraft, larger yacht ...).

Usually, economic growth and efficient action according to the economic principle is proposed to alleviate this scarcity problem. As obvious as this may be, an alternative approach, which starts with the limitation of needs, should not be completely ignored in view of other cultures and the history of economic thinking. For example, not only Buddhists recommend frugality and satisfaction, but also scholastics such as Thomas Aquinas and Greek philosophers such as Aristotle, who speaks of 'needs appropriate to one's class'. A similar approach to dealing with scarcity is the sufficiency strategy, in which one's own needs are consciously limited, usually for ecological reasons and the desire for sustainability.

The thought pattern of need is important in the context of economic education, because needs ...

  • or the desire for their satisfaction are the starting point of human action;
  • in combination with only limited available goods, lead to a scarcity problem, from which the economic principle and the necessity of economic activity arise;
  • lead to demand and are thus a central element of market processes;
  • are closely related to preferences and benefit maximization, which in turn are an important component of the economic behavior model and thus of many economic approaches and economic concepts (especially institutional economics education);
  • form the basis for individual decisions (e.g. for consumer products or a profession).

The category of need is closely related to other patterns of thinking such as: goods, scarcity, economic principle, growth.

Due to their fundamental importance for economic activity, needs are inherent in almost all economic issues. However, they have a prominent significance in subjects relevant to teaching, such as ...

  • Advertising, the purpose of which is in particular to arouse or specifically influence consumer needs. Consumers who have reached the age of consent should be sensitized to this and internalize suitable strategies for interpreting advertising and marketing measures;
  • become aware of their own needs, question them and prioritise them;
  • Dealing with scarce resources (e.g. pocket money), keeping a budget book, preventing overindebtedness;
  • Career orientation, especially in the context of the needs-based approach to career choice, in which individual needs are a central aspect of career choice.