People must make choices because money and resources

The term «scarcity» has a slightly different definition in an economics class than it does in the «real» world. The quantity demanded goes down, dhoices not demand. We’ll talk more about that later. In an economics class the term «investment» does NOT mean the stock market, money markets. We will have to call such things «financial investments» because the term «investment» has a different meaning in economics. Resougces does not mean that only a little of something is available. For example, I grew up in northeastern Minnesota. About 30 miles away becuase my hometown was the town of Erskine, Minnesota. Just outside of town people must make choices because money and resources certain type of rock exists that occurs nowhere else in the world. They have named it «Erskinite». Erskinite is only found near Erskine, Minnesota and only a little of it has ever been. Because nobody wants it.

This preview shows page 1 — 2 out of 4 pages. I cannot even describe how much Course Hero helped me this summer. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero. University of Pennsylvania. ECON Uploaded By adelice Three Key Economic Ideas: 1. People are rational. Economists assume that consumers and firms use all available information as they act to achieve their goals. Rational individuals weigh the benefits and costs of each action, and they choose an action only if the benefits outweigh the costs. People respond to economic incentives. Optimal decisions are made at the margin. Given the decision of watching another hour of TV or spending that hour studying: a.

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Marginal analysis is analysis that involves comparing marginal benefits and marginal costs. What goods and services will be produced? Consumers, firms, and the government face the problem of scarcity by trading off one good or service for another. Each choice made comes with an opportunity cost, measured by the value of the best alternative given up. You’ve reached the end of your free preview. Want to read all 4 pages?

This preview shows page 1 — 3 out of 10 pages. I cannot even describe how much Course Hero helped me this summer. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero. Cypress High School. Question 1 People must make choices because wants are unlimited resources are scarce they are unequally endowed with talent wants are unlimited and resources are scarce Question 2 Specialization can increase total output without an increase in resources is beneficial only if exchange takes place should be based on the principle of comparative advantage All three alternative answers are correct Question 3 Overspecialization and the resulting dependence on one or a few products by a nation can lead to severe economic fluctuations if demand for those products varies widely. True False Question 4 Government regulations which affect entrepreneurial activities within a nation also affect total output and the standard of living. True False Question 5 A society will be at a point inside its production possibilities curve whenever all resources are fully employed income is equally distributed some resources are unemployed resources are scarce. Question 6 Every economic system must decide what and how much to produce how to produce how to distribute goods and services to the population all of the above Question 7 A movement downward toward the right along a typical production possibilities curve represents decreasing production of both goods under consideration increasing production of both goods under consideration increasing production of one good and decreasing production of the other increasing production of one good with no change in production of the other Q uestion 8 The ability to produce a good or service at a lower opportunity cost than other producers face is known as comparative advantage. True False Qu estion 9 If a society is producing at a point on its production possibilities curve, it does not have the problem of scarce resources. You’ve reached the end of your free preview. Want to read all 10 pages? Share this link with a friend: Copied!

A simple plan of the economy is called an. Has about 90 accounts for overseas central banks. Credit function —tending and investing money. Chances to improve your situation are. Keep any receipts you are given. Pricing policies. They are:. This action is often called «cornering the market» and is illegal in many countries. So we can say that annual reports help us to understand financial status of the firm in the end of the fiscal year and to make educated decisions- invest in company our capital or not.

A calculation of the value, cost, size or amount of something is. There are four golden rules: Examine the goods your buy at. Thus you can compare your income and expenses. If there is an excess of paper, the relative demand for paper will go. There are two main kinds of the elasticity of demand, it is highly elastic and inelastic. At the end of my presentation I have to say that spending becomes income for someone. Buyers want the price that gives them the most value for the least cost. It weighed the gold, gave a receipt for it and assumed responsibility for its safety. Then, society will understand the true costs of making one decision rather than another, and can make the decision that best fits its values and goals. The system is an unusual system of public and private elements and centralized and decentralized components. The system has four basic functions:.

People begin to learn about economics when they are still very young. There is a big gap between what they want and what they can. Than they discover that there are thousands of things they or their parents could buy.

Gradually, they settle into two major economic roles: consumer and producer. Consumer buy goods and services for personal use, not for resale. Consumer goods are products, such as food, clothing, and cars, that satisfy people’s economic needs or wants. Some consumer goods, such as food, do not last a long time.

Other goods, such as cars or VCRs, last longer. Services are actionssuch as haircutting, cleaning or teaching. Services are used up at the time they are provided. In order to produce something, a person must first have right resources. Resources are the materials from which goods and services are.

There are three kinds of resources: human peoplenatural raw materialsand capital resources capital, or the money or property. No economy has an unlimited supply of resources. In other wordsthere is a scarcity of resources. The basic economic questions individuals and nations face are: What goods and services will be produced? How will they be produced? Who will get them? How much will be produced for now and how much for the future? The answers to the questions depend on a country’s human, natural, and capital resources.

Each country will answer 4 questions in a different way. All production involves a cost. This cost is not counted simply in terms of money but also in terms of resources used.

In building a bridge, for example, the real costs of the bridge are the human, capital, and natural resources it consumes. The capital resources these people use include a variety of tools and machines. Building a bridge also requires natural resources. Since resources are limited and human wants are unlimited, people and societies must make choices about what they want.

Each choice involves costs. The value of time, money, goods and services given up in making a choice is called opportunity cost. When people make a choice between two possible uses of their resources, they are making a tradeoff between.

Then, society will understand the true costs of making one decision rather than another, and can make the decision that best fits its values and goals. How can the concepts of opportunity costs and tradeoffs be used to help explain how the economy works?

One way is to construct a simple plan of the economy called an economic model. The simple plan helps economists to analyse economic problems, seek solutions, and make comparisons between the economic model and the real world.

One of the most important choices a society makes is between producing capital goods and producing consumer goods. If a nation increases its production of consumer goods, its people will live better lives today. Since every economic decision requires a choice, economics is a study of tradeoffs. When you analyse each side of a tradeoff, you can make better decisions. There are two types of pricing policies: to concern price emphasis and to emphasize low prices.

The price determines the number of sales. A good example of price emphasis is loss leader pricing. It means that you chose one item and sell it at a very low price. The consumer buys it and decides to buy something else, because he gets some extra cash. And now something about de-emphasis: it concerns high quality expensive items. Commodities of different kinds satisfy our wants in different ways. For example: food, car, medicine, books satisfy very different wants.

Utility and usefulness are different things. For example: a submarine may or may not be useful in time of peace, but it satisfy a want. Many nations want submarine. Utility varies between different people and different nations.

For example: somebody can be a vegetarian and he will be rate the utility of vegetable very highly, while somebody who eats meat can rate the utility of meat very highly.

And about people must make choices because money and resources mountain-republic like Switzerland has little interest in submarines while maritime nations rate then very highly. Utility varies is also in relation of time. For example: in wartime the utility of bombs and guns is high. Utility of the commodity is also depend from quantity. If paper is freely available, people will not be so much interested in buying too much of it.

If there is an excess of paper, the relative demand for paper will go. Individual cannot change the prices of the commodities he wants. But theoretical he can do it. For example, if he byes a lot of smth. Economists call this tendency the Low of Diminishing Marginal Utility. The interaction of buyers and sellers determines the prices for goods and services. If the price is too low, a shortage will develop and if the price is too high, a surplus will develop.

In a market economy, prices are the result of the needs of both buyers and sellers. The sellers will supply more goods at higher prices. The buyer will buy more goods at lower prices. Some prices is satisfactory to both buyers and sellers. This price is called an equilibrium price. In a market economy, the actions of buyers and sellers set the prices of goods and services.

The price, in turn, determine what is produced, how it is produced and who will bay it. Suppliers usually want the price that allows them to make the most money. Buyers want the price that gives them the most value for the least cost. The items are sold one at a time, buyers mast quickly decided what price they are willing to pay. Imagine now that you want to buy electric popcorn maker on the auction.

In order to get it you will have to outbid all the others who want it. At first you look into your wallet. And what factors so far have influence you? You decision is the result of your tastes, your available cash income, your wealth, your credit.

You have also had to think of the price of substitutes and the price of related items. The popcorn demand schedule illustrates the low of demand, which indicates that as the price of an item increases, a smaller quantity will be bought. The degree to which changes in price cause changes in quantity demanded is called elasticity of demand. There are two main kinds of the elasticity of demand, it is highly elastic and inelastic. Highly elastic means that demand changes when the price changes and inelastic means when people buy nearly the same amount even though the price of smth.

There are two main reasons for elasticity of demand. The first concerns the relationship between income and the cost of the product. The second reason why demand is elastic concerns whether or not substitute product is available. Whenever people who are willing to sell a commodity contact people willing to buy it, a market for that commodity is created. Buyers and sellers meet in person, or they may communicate by letter, by phone or through their agents. In a perfect market there can be only one price for a given commodity: the lowest price which sellers will accept and the highest which consumers will pay.

Competition influences the prices prevailing in the market. Although in a perfect market competition is unrestricted and sellers are numerous, free competition and large numbers of sellers are not always available in the real world.

In some markets there may only be one seller or a very limited number of sellers. Such a situation is called a «monopoly». It is possible to distinguish in practice four kinds of monopoly. State planning and central control of the economy often mean that a state government has the monopoly of important goods and services.

A different kind of monopoly arises when a country has control over major natural resources or important services. Such monopolies can be called natural monopolies. These types of monopoly are distinct from the sole trading opportunities.

This action is often called «cornering the market» and is illegal in many countries.

Economists study the choicex. In the economy, goods and services are produced, exchanged, and consumed. So, economics is the study of the production, exchange, and consumption of goods and services. The subject matter of economics can be approached from two levels of analysis: macroeconomics and microeconomics. Microeconomics looks at the production, exchange, and consumption of goods and services at the level of an individual producer of the good or the market in which a single good or service is exchanged or an individual consumer of the product.

Lecture 1: Scarcity and Choice

The key word is individual; microeconomics deals with the ersources of the individual entities that make up the economy. Macroeconomics deals with the entire national economy. Rather than being concerned with the production of a single good or service, say, vacuum cleaners, macroeconomics necause at the total production of all goods and services including vacuum cleaners, coffee makers, and frozen pizza. Rather than worrying about why the price of gasoline has risen or fallen over the last several weeks macroeconomics is concerned with the inflation rate, a measure of how the average price of all goods and services has changed. Economics is the study of the allocation of scarce resources among competing and insatiable needs so as to maximize welfare. Economists assume that people do not act randomly. Instead, people’s behavior has a purpose. We assume that people act in their own rational self-interest. People make the choices they believe leave them best off. Economics resources are used to produce goods and services. There are three categories of economic resources: land — raw materials and natural resources labor — workers capital — buildings, machinery, people must make choices because money and resources, equipment.