How does the economy differentiate between needs and desires

needs are wishes of people and represent the starting point of economic activity because they strive to satisfy needs, e.g. with goods. Of requirement: is spoken when, in addition to the need, there is also the purchasing power to satisfy it. As soon as the demand takes effect in the market, it is demand.

For example, if someone wants a car, it is a need. If that person has enough money to buy a car, there is a need. As soon as the person makes their need in the market, e.g. when they go to a car dealer, demand arises.

The multitude of needs can be arranged in different systems, as can be seen from the following explanations.

Maslow's hierarchy of needs is the best-known model for classifying needs. It is assumed that the needs of a "lower" level must first be largely satisfied before the satisfaction of the "higher" needs is sought.

Examples of needs of the individual levels:

  • Basic physical needs: eating, drinking, sleeping, sex (also called existential needs)
  • Security: home, permanent job, insurance, personal future prospects, religion, personal weapon possession.
  • Social relationships: communication, partnership, circle of friends.
  • Social recognition: career, status, power, self-esteem.
  • Self-actualization: altruism, individuality, justice, kindness, talent development.

The division of needs according to urgency is also important. The associated distinction between existential needs and cultural or basic needs and luxury needs is not clear, but it does provide a good orientation.

A further classification can be made according to individually and collectively evoked needs are made. Collective needs arise from social life and describe the desire for education, security and a clean environment. Individual needs relate to the desires and needs of an individual citizen, but they cannot be completely separated from the collective needs, as both types are linked.

If one separates according to the desired object, there is a division according to material and immaterial makes sense. While the former are closely related to human consumption wishes (e.g. possession of an MP3 player), immaterial needs such as e.g. B. “Living in an intact environment” or the “desire for a healthy way of life” are characteristics of human life that cannot be precisely expressed in euros and cents.

Depending on whether someone is aware of their needs or not, one speaks of open or latent existing needs.