Scarcity and Choice: The Economic Problem.
Economics "is the study of how best to use limited means in the pursuit of unlimited ends".
Our necessities in life are few, but our wants are endless. It is nonsense to assign top priority to everything. One must choose the most desirable alternative among the possibilities permitted by scare resources available, this is referred to as an optimal decision.
( I ) Scarcity, Choice, and Opportunity Cost.
The resources available for decision-makers are always scarce (limited), and as result everyone has to make hard decisions. This is the fundamental problem of any economy, the scarcity of available resources.
Resources "are the instruments provided by nature or by people that are used to create goods and services". The main types of resources are often referred to as land, labor, and capital, they are also called inputs or factors of production. Resources mainly include the following:.
• Natural resources include minerals, soil, water and air.
• Labor is a scare resource because of time and skills limitations (the day has only 24 hours, and the number of skilled workers are limited).
• Factories & machines are resources made by people. .
• Goods are in limited supply because their production requires fuel, labor, and other scare resources. .
All resources are scare, which means that humanity has less of them than we would like. Becasuse of the scarcity in resources, choices must be made among a limited set of possibilities, taking into consideration that a decision to have more of one thing means the less of something else.
In order to increase the output of any product (e.g. cars), this requires the increase in labor, steel, and fuel in automobile production. The result will be the decrease in production of something else.
Opportunity Cost and Money Cost.
Almost everything on earth has its price (whether measured by money terms or other terms).
Scarcity forced us to make a choice, as there are not enough resources to fulfill all of our desires. When we make a choice, we forgone the next best alternative, and that is the opportunity cost of doing our choice. ... Scarcity is not the same as a shortage. ... Scarcity will last forever, and shortage is not. ... Scarcity cannot be solved. ...
In the chapter The Problem is Scarcity the author discusses the importance of economics, defines scarcity and opportunity cost and mentions the five basic economic questions. First, economics is important to study because it affects a person everyday in different ways and helps you make better economical choices. ... Finally, the author concludes the meaning of economics, scarcity and opportunity cost. ...
The economic problem involves the scarcity of resources in relation to wants, and because of this, choices have to be made about how resources will be used in production. ... Choices therefore need to be made about which wants and needs are a priority, and which are can be settled in the future. The choices that arise from the scarcity of resources include: What and how much to produce? ... Examples of individuals, firms and governments deal with the choices that arise from the scarcity of resources involve opportunity cost. ... In conclusion, individuals, firms and governments all use the ...
Chapter 1 The Nature and Scope of Economics Economics is a social science that studies how people and institutions within a society make choices and how these choices determine the use of the society's scarce resources. Choices matter, because resources ore limited while wants are unlimited. ... Scarcity is another essential characteristic of an economic good. ... A free good lacks the element of scarcity and therefore has no price. ... Economics is a science of choices. ...
Chapter 1 The Nature and Scope of Economics Economics is a social science that studies how people and institutions within a society make choices and how these choices determine the use of the society's scarce resources. Choices matter, because resources ore limited while wants are unlimited. ... Scarcity is another essential characteristic of an economic good. ... A free good lacks the element of scarcity and therefore has no price. ... Economics is a science of choices. ...
Scarcity consequently circles us, and this does not stop (Natural resource scarcity – classical to contemporary views: Journal of Natural Resources Policy Research: Vol 7, No 4, 2016). ... Economic problems are the problems of comparative scarcity wants to better resources in the relevant thought. ... Variations in costs play a vital role in the choice, and it is expected that price elasticities are large as in this case 4.0. Where the choice alternatives are very different, the price elasticities are more average. Since there subsist many substitutes for the entertainment purpose obtain...
If you reflect on this table, you will see the importance of scarcity. You can think of the production-possibilities frontier as the way economists visualize scarcity. 2. ... Both the model of supply and demand and consumer choice with utility analysis are key elements of an understanding of an exchange economy. ...
However, contrary to Adam Smith (who used the same example but explained it on the basis of water and diamonds having different labor costs of production), Law regarded the relative scarcity of goods as the creator of exchange value. Scarcity = Paradox of Value (Water/Diamond Paradox) = things that are essential to life do not always have the highest value in a monetary sense. ... The value of diamonds was greater than the value of water because it was marginal utility and not total utility that determines consumer choice and hence value. ...
Firstly, historical institutionalism looks at the issues that people face, in a historical, political context, specifically the issues surrounding scarcity and vying for resources and the inequality that is equivocated with scarcity, especially as it pertains to goods and services. ... Rational Choice Institutionalism was largely influenced by institutional and congressional behavior in the mid 1970's and uses neo-classical economic molds to explain how institutions are created and how political actors come to make decisions. The limitations that come with the Rational Choice institution ...
