...Scarcity Think of a thing that you like to have. What would your life be like if you suddenly couldn't get any more of it? People deal with this kind of problem every day. It's called scarcity. It comes from the word scarce, which means there isn't a lot of it or it isn't always available. Some fruits and vegetables are scarce in markets sometimes because those fruits or vegetables grow only at certain times of the year. Because the supply of fruits and vegetables is lower, there is a better chance that those fruits and vegetables will be scarce, or not always available. You may find that the market has no strawberries at all. Why? Either no shipments of strawberries came in, or so few strawberries came in that by the time you got there, they were all gone. What does this mean for the demand of strawberries? If enough people want strawberries when none are available, then the demand is quite high. And the demand is high not because the price is low (as is usually the case) but because the supply is low. An older person in your family can probably tell you about a time 30 years ago when there was a gasoline shortage. At that time, in the 1970s, gasoline was scarce. Many people wanted to buy it, but only a certain amount was available. This is a great example of scarcity: Wants are more than what is available. The supply was low. Because the demand was greater than the supply, the gasoline was scarce. So how does scarcity relate to supply and demand? Scarcity is a measure...
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...Economics studies how people, acting as individuals or in groups, decide to use scarce resources to satisfy wants. This fundamental economic concept of scarcity is at the core of the discipline. There are never enough natural resources, human resources, or capital resources (man-made goods such as tools, equipment, machinery, factories) to produce everything society wants. Therefore, choices must be made on what to produce, how to produce, and for whom to produce. Choices must also be made at a personal level. There never seems to be enough money or time to have or to do everything one wants. Economics is a way of thinking, a science of making choices. Economists examine the decision-making processes of individuals, businesses, markets, governments, and economies as a whole. An understanding of economic principles helps people to consider not only the short-term effects of a decision, but also its long-term effects and possible unintended consequences; to see the connections between personal self-interest and societal goals; to understand how individual and social choices are made in the context of an economy; and to analyze the impact of public policies and events upon such social goals as freedom, efficiency, and equity. Because of increasing interdependence and globalization, everyone in the United States needs to be aware of the issues in the global economy, their role in that system, and be able to respond to changes so that they can effectively maintain...
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...BASIC ECONOMIC CONCEPTS LESSON 1: BASIC ECONOMIC CONCEPTS By the end of this lesson, you should be able to • • • • • give an overview of Economics deal with the Economic Problem discuss the Methodology in Economics differentiate between Microeconomic Issues and Macroeconomic Issues 1.1 WHAT IS ECONOMICS? Some opinions: “Supply and Demand - that’s all there is to economics. The rest is nonsense.” “Economics is about what everyone knows in a language that nobody understands.” “Economics explains the price of everything and the value of nothing.” “Economists are quite unique in their failure to solve a single one of the problems of their profession.” John Papworth Economist– the one profession where you can gain great eminence without ever being right.” George Meany While these views / opinions of economics / economists contain some element of truth, they hardly give a meaningful insight into the nature of the subject and the work of economists. What is Economics? Many definitions have been offered for Economics. Mostly, they focus on two inter-related approaches to the above question: 1. 2 the problems that Economics deals with; and the methods that economists use in dealing with these problems. An example of the ‘problem’ type of definition is given below: “Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” Lord Robbins 1929 Simply put, Economics can be defined as the social science which studies...
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...Normative economics is the study of what the goals of the economy should be. Positive economics is the study of what is, and how the economy works . It explores the pure theory of economics, and it discovers agreed-upon empirical regularities. These empirical regularities are often called empirical facts—for example, large price fluctuations in financial markets tend to be followed by additional large price fluctuations. The three coordination problems any economy must solve are what to produce, how to produce it, and for whom to produce it. In solving these problems, societies have found that there is a problem of scarcity. • Deduction begins with almost self-evident principles and develops models and conclusions based on those principles. Induction looks at empirical evidence first and infers principles from those observations. Abduction is a combination of deduction and induction. • Economic reasoning structures all questions in a cost/benefit framework: If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs exceed the marginal benefits, don’t do it. • Sunk costs are not relevant in the economic decision rule. • The opportunity cost of undertaking an activity is the benefit you might have gained from choosing the next-best alternative. Summary • “There ain’t no such thing as a free lunch” (TANSTAAFL) embodies the opportunity cost concept. • Economic forces, the forces of scarcity, are always working. Market forces, which...
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...Chapter 1: What is Economics? Section 1 Key Terms • need: something essential for survival • want: something that people desire but that is not necessary for survival • goods: the physical objects that someone produces • services: the actions or activities that one person performs for another • scarcity: the principle that limited amounts of goods and services are available to meet unlimited wants Chapter 1, Section 1 Copyright © Pearson Education, Inc. Slide 2 Key Terms, cont. • economics: the study of how people seek to satisfy their needs and wants by making choices • shortage: a situation in which consumers want more of a good or service than producers are willing to make available at particular prices • entrepreneur: a person who decides how to combine resources to create goods and services • factors of production: the resources that are used to make goods and services Chapter 1, Section 1 Copyright © Pearson Education, Inc. Slide 3 Key Terms, cont. • land: all natural resources used to produce goods and services • labor: the effort people devote to tasks for which they are paid • capital: any human-made resource that is used to produce other goods and services • physical capital: the human-made objects used to create other goods and services • human capital: the knowledge and skills a worker gains through education and experience Chapter 1, Section 1 Copyright © Pearson Education, Inc. Slide 4 Chapter 1...
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...Chapter 1 introduces you to economics—the social science that studies how individuals, institutions, and society make the optimal best choices under conditions of scarcity. The first section of the chapter describes the three key features of the economic perspective. This perspective first recognizes that all choices involve costs and that these costs must be involved in an economic decision. The economic perspective also incorporates the view that to achieve a goal, people make decisions that reflect their purposeful self-interest. The third feature considers that people compare marginal benefits against marginal costs when making decisions and will choose the situation where the marginal benefit is greater than the marginal cost. You will develop a better understanding of these features as you read about the economic issues in this book. Economics relies heavily on the scientific method to develop theories and principles to explain the likely effects from human events and behavior. It involves gathering data, testing hypotheses, and developing theories and principles. In essence, economic theories and principles (and related terms such as laws and models) are generalizations about how the economic world works. Economists develop economic theories and principles at two levels. Microeconomics targets specific units in the economy. Studies at this level research such questions as how prices and output are determined for particular products and how consumers will react to price...
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...Economics is a way of thinking about issues which helps us to: • Understand the economic environment in which management, social, and individual decisions must be made. • Understand the justifications for, and likely effects of, Government economic policy • Uses economic principles to make “rational” decisions What is “Economics”? • “The study of how people make choices under conditions of scarcity and of the results of those choices for society” Unlimited wants plus scarce resources • Choices involve making decisions between competing interests (what, how, for whom), • The choice involves looking at the Costs and the Benefits involved in the decision • Measuring the Costs and the Benefits accurately is crucial to the role of economics The scarcity principle (the ‘no free lunch’ principle): • Although we have boundless needs and wants, the resources available to us are limited. Consequently, having more of one good thing usually means having less of another. Microeconomics • The study of individual consumer, firm and market behaviour Macroeconomics • The study of the aggregate economy Economic decision • Any decision where securing something of value means going without some other thing of value The cost–benefit principle • Economists choose among competing interests by using cost–benefit analysis • An individual (or a firm or a society) should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs...
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...Terms Comparison Michelle Ozete HCS 552 Professor Harry Morris Terms Comparison Health economics assists as one of the processes that may be used to understand different matters related to health and health care. From an economics perspective, health economics is one of many subjects to which economic principles and methods can be associated to. Therefore, by describing the principles of health economics, we are actually describing the principles of economics and how they may be understood in the setting of health and health care. As Morris, Devlin and Parkin (2011) put it: “Health economics is the application of economic theory, models and empirical techniques to the analysis of decision-making by individuals, health care providers and governments with respect to health and health care”. There are numerous descriptions of economics, but a description given in by Begg, Fischer and Dornbusch (2005) is most informative: “The study of how society decides what, how and for whom to produce”. In reviewing these topics, health economics tries to associate the same analytical methods that would be associated to any object or service that the economy creates. Noting, it also frequently asks if the issues are different in health care. Resources, production, opportunity cost and scarcity The meaning of economics as stated above includes the term “to produce”, highlighting that economics deals with both health and health care as a good or service that is manufactured, or produced...
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...Quiz Chapter 1-1 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Which of the following is NOT a basic economic question? |a. |WHAT to produce |c. |WHEN to produce | |b. |FOR WHOM to produce |d. |HOW to produce | ____ 2. What is the fundamental problem of economics? |a. |Scarcity |c. |capital | |b. |the factors of production |d. |labor | ____ 3. Which of the following lists the four factors of production? |a. |land, labor, wants, entrepreneurs |c. |land, labor, capital, scarcity | |b. |labor, needs, capital, entrepreneurs |d. |land, labor, capital, entrepreneurs | ____ 4. Which of the following is NOT a capital good? |a. |a bulldozer at a construction site | |b. |an oven at a bakery | |c. |a cash register at a clothing store ...
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...In economic sense, when something is abundant, it does not necessarily mean it is not scarce. Scarcity which is “the condition of having to choose among alternatives” ( Rittenberg & Tregarthan ), simply implies that something can be abundant but a choice must be made to better utilize it. The economic definition of scarcity implies that supply of resources is bounded. Therefore something that is abundant can also be quantified and to this extent bounded. For example, a nation that possesses an excellent harvest of plantain will enjoy low prices as there is much plantain in the market. Plantain is still scarce in economic sense as it can still run out. On the other hand, emotions like love, courage, fear, and many others cannot be measured with the economic concepts of scarcity as these emotions cannot be bounded. This clearly indicates that their abundance do not affect their economic scarcity ( Prioktan, 2008 ) In economic sense, when something is abundant it means its supply exceed demand at zero price. In simplicity, if a good or service is free, there is no shortage. This indicates that there is no opportunity cost in supplying it. Free health care to the sick is still considered scarce in economic sense because the government have to incur the cost and thus the taxpayers. Air can be considered abundant since there hardly be shortage of air to most people to breathe most of the time. On the other hand, air is scarce if we want it clean or unpolluted as resources most...
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...Intro to Economic Concepts Definition of Scarcity A situation in which human wants are greater than the capacity of available resources to provide those wants. 3 Parts: 1. People want it 2. There is a limited amount of it 3. It has more than one productive use Scarcity Scarcity vs. Abundance – people see many signs of abundance (e.g. cell phones, iPods) and also see resources wasted daily (e.g. water and food). However, as long as resources are limited and people’s wants are unlimited, scarcity (in the economic sense) will exist. Scarcity In economic reasoning, scarcity is a relative concept, not an absolute one. Scarcity does not mean “not plentiful.” In economics, something is scarce when it has more than one valuable use. = & Opportunity Cost Opportunity cost is what you give up to obtain something else, the second-best alternative. However, what you must give up is not money – it is whatever good or service you would have spent the money on as your next favorite choice. Goods v. Services Good – something that is tangible; it can be seen and felt. It requires scarce resources to produce and it satisfies human wants Goods v. Services Service – something that is intangible; yet it too requires scarce resources to produce and satisfies human wants Is it a good or service? Productive Resources L – land (and stuff from land) L – labor (physical and mental) C – capital (human-made...
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...SCARCITY SCARCITY Introduction We live in the world of scarcity. None of us can have all that we want. It is the most fundamental concept in economics. We do not and cannot have enough income or wealth to satisfy our every desire for these develop and expand with every technological advancement. The world is such that no matter how much we produce; we cannot have as much of everything desired without sacrifice. Scarcity occurs for everyone, rich and poor. In economics, this sacrifice is called opportunity cost. (chon, 2011) Humanity is demanding over greater economic productivity at a time when natural resources, the input that feeds this productivity, are dwindling. To reduce pressure on key assets, such as water, minerals, fuel and land, we must use less of them, and we need to increase the efficiency and productivity of resources that we do use, to achieve more output per input. Put simply, we must do more with less. Developing this society will require large-scale and widespread changes to how the economy functions. However, scientific, economic and social research can play an important role in reaching this goal, by determining current levels of consumption, measuring levels of efficiency, and developing new, more efficient technologies and processes. Furthermore, it can analyse different policy options and help us understand their impact on behavior and perceptions of resource use. (Brown,1995) This paper will focus on scarcity and the use of PPC to reduce...
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...Economic Principles ECN220 Economic Principles Truly, the mind has been studied for many years, and is an amazing organ. Specifically, the study of economics and what causes people to make the decisions they do. “The National Science Foundation (NSF)-funded scientist is looking directly at brain activity to see whether, and how, certain portions of the brain correlate with the values people express, and the choices they later make,” (Cimons, 2014). What is economics? Economics is a study of people’s decisions, how they come to make those decisions and why. The decisions can be for the family, personal, or business. Indeed scarcity plays an important role in the decisions that people make, and unfortunately is a way of life. Everyone has their own view of what type of scarcity that causes them to make their decisions, as it can be the amount of time, money constraints, or labor issues. How do Economists use theories and models to understand important economic issues? Economists use theories and models as a tool, or a way to determine an answer. “John Maynard Keynes (1883–1946), one of the greatest economists of the twentieth century, pointed out that economics is not just a subject area but also a way of thinking,” (Principles of Economics, 2014). Identify each of the following topics as being part of microeconomics or macroeconomics: a. the impact of a change in consumer income on the purchase of luxury automobiles Microeconomics b. the effect of...
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...utility theory….8 3.1 The limitation of marginal utility theory………………….8 4. Conclusion………………………………..9 5. Reference………………………………..10 1. Introduction 1.1 Origin of Marginal Utility Theory The origin of marginal utility theory can date back to Aristotle. It is widely considered that Aristotle was the first man to bring forward the idea of value in use. He pointed out that goods gain their value from personal utility, scarcity and costs. And an increase in a specific good will bring an decrease in value and the value can even become a negative one. This is the original form of the principle of diminishing marginal utility. The term marginal utility was first used in this connection by the Austrian Wieser. (Marshall Alfred 1920 Principles of economics chapter Ⅲ.Ⅲ ,p14) Adopted by Prof. Wicksteed, it corresponds to the term Final used by Jevons. His list of anticipators of his doctrine is headed by Gossen, 1854. (Marshall Alfred 1920 Principles of economics chapter Ⅲ.Ⅲ ,p14) Not until the 18th century, did Adam Smith base a system of political economic entirely on marginal utility calculation. 1.2 Development of Marginal Utility Theory The crucial period of the development of marginal utility theory is from Adam Smith to Slutsky, that is, from 1776 to 1915. In conclusion, it includes...
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...Economics: The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity. Macroeconomics examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sectors. Microeconomics is the study of parts of economics concerned with particular markets, and segments. This study looks at analysis in a single household, a company, or a specific industry. Microeconomics looks closely at supply and demand in single markets, consumer’s behaviors and choices. However, Macroeconomics is the study of the economy as a whole unit or its elementary sectors or aggregates, such as the government, household, and business subdivisions. Class based on what you have read in this chapter, explain the law of demand. Why does a demand curve slope downward? How is a market demand curve derived from individual demand curves? Based on this chapter, law of demand is when other factors are the same, the quantity of demand increase as prices falls, and the demanded quantity decreases as prices rises. The demand curve slope downward reflects the demand law philosophy because there a negative relationship between price changes and the demanded quantity of a particular product. If there are two buyer representing two different individual demand curves There are a variety of modern definitions of economics. Some of the differences may reflect evolving views of the...
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