SCARCITY AND ECONOMICS


 Learning Contents:                                                            

·         Understanding Scarcity of Resources.

·         Understanding Economics.                                                                                                                                

       Scarcity:  

 Scarcity means shortage or we can say that anything which is limited or short in supply.              

Resource:

Something that is available for use or that can be used for support or help. It can be the stock of money, materials, tools, physical assets, labor, land, etc.

Resources are not only scarce but have alternative uses as well.

Scarcity of Resources: scarcity is a very basic fact of life. There will be no need of understanding the concept of scarcity if we are supplied with unlimited means (resources) but in reality, our needs are always greater than our means (resources). Human wants for goods, services and resources exceed what is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply. They are simply not enough resources that can meet all our needs and wants.

Resources have alternative uses: It means the different ways in which resources can be put to different uses (opportunity cost).  For e.g. Land can either be used to grow crops or build a school. Another example says money can either be used for paying the school fees or paying the electricity bills.

Resources are not only scarce and they also have alternative uses which lead to the problem of rational management of resources or allocation of resources. It is also called an economic problem or problem of choice. Keeping the above fact in consideration, people have to make decisions in their own self-interest, weighing benefits and costs.

Understanding Economics: 

The study of economics revolves around the core problem of rational management of resources. Economics is the study of how humans make choices under conditions of scarcity or we can say that economics is the study of how humans make decisions in the face of scarcity.

These can be individual decisions, family decisions, business decisions, or societal decisions. Every society, at every level, must make choices about how to use its resources. Families must decide whether to spend their money on a new car or a vacation. Towns must choose whether to put more of the budget into police and fire protection or into the school system. Nations must decide whether to devote more funds to national defense or to protect the environment. In most cases, there just isn’t enough money in the budget to do everything. Economics helps us understand the decisions that individuals, families, businesses, or societies make, given the fact that there are never enough resources to address all needs and desires.

   Multiple Choice Questions:

  1. The resources for satisfying human wants are:

              a.    Limited

             b.  Unlimited

                    c.  None of these

  2. When does the problem of scarcity arise?

       a. Supply of resources> Demand of Resources

       b. Supply of resources< Demand of resources

       c. Supply of Resources= Demand of Resources.

   3. Economic Problem arises because

      a. Resources are scarce

      b. Human wants are unlimited

      c. Resources have alternative uses

      d. All of these.

    Answers

  1. a    2. b    3. d









Comments

Post a Comment

Popular posts from this blog

SHIFTS & ROTATIONS IN PRODUCTION POSSIBILITY CURVE

Image
    Learning Contents:                                                                Shifts   in   PPC  Rotations in PPC Change in Production Possibility Curve (Shifting/Rotation) The change in the Production Possibility curve can be of two types:  Shift in PPC: PPC will shift when there is a change in productive capacity (resources or technology) with respect to both the goods. Rotation of PPC: PPC will rotate when there is a change in productive capacity (resources or technology) with respect to only one good. Shifts in PPC:   The shift in PPC can either be rightward or backward. These shifts bring about a change in the production of both goods in an economy. The shifts in PPC are of two types: Rightward shift in PPC: Rightward shift in PPC occurs when the resources are increased or technology is improved for the production of both goods that means we can produce more of both the goods. Accordingly, PPC shifts to the right from Initial PPC (AB) to Final PPC (CD).   Re
Read more »500

Income Elasticity: Luxury Goods, Necessity Goods, and Inferior Goods.

Image
  Learning Contents:                                                               ·         Understanding Income Elasticity with respect of luxury goods, necessity goods and inferior goods. The demand for a commodity not only depends on the price of a commodity but also the income level of the consumer. It is a general understanding that a consumer usually prefers to spend more when his income rises and less when his income falls. Sometimes, we might also experience a fall in the demand of certain goods and services even when income rises. Therefore, income elasticity varies with respect to different types of goods and services. The income elasticity measures the percentage change in quantity demanded as a result of percentage change in the income of the consumer. The formula of income elasticity of demand is, The income elasticity measures the demand’s sensitivity or responsiveness to the change in income.   In simple words, it measures to what extent demand changes as a result o
Read more »500

CONSUMER’S PREFERENCES AND INDIFFERENCE MAP

Image
    Learning Contents:                                                               ·          Understanding Consumer preferences and Indifference curve. ·          Understanding Indifference Map. Introduction: The concept of the indifference map is based upon the concept of consumer preferences. So, it is important to first understand the concept of consumer preferences. Consumer’s Preferences: Preferences indicate individual tastes, likings, etc. that determine the amount of pleasure, happiness people get from the consumption of the goods and services and measured by the utility of various bundles or combinations of goods. It allows the consumers to rank these bundles of goods according to the levels of utility it provides them. Note that preferences are independent of income and prices. The ability to purchase goods does not determine a consumer’s likes or dislikes. One can have a preference for Rolex watches over Titan but only have the financial means to wear a titan
Read more »500