Scarcity and choice

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Scarcity and choice

  1. 1. MACROECONONMICS Scarcity, Choice and the Production Possibilities Curve 1 Ashraf Alsinglawi B.Sc. Pharmacy, MBA12/02/2013 Ashraf Alsinglawi 1
  2. 2. Economic Scarcity and theFunction of Choice• Foundation Of Economics• The word economy  comes from two Greek words, one meaning house and the other meaning distribute. It was first used to describe the management of a household, but by the mid-1700s, it came to describe the management of the resources of a country.• Needs and wants are unlimited, but resources are scarce. What are resources? Resources  are otherwise known as the factors of production and they include land, labor, capital and entrepreneurship - everything it takes to produce the stuff that you and I buy on a regular basis in our economy.12/02/2013 Ashraf Alsinglawi 2
  3. 3. Economic Scarcity and theFunction of Choice• Scarcity And Choice•  scarcity in general terms, means that the demand for something is much greater than the supply, or there is not enough money to buy it.• The exact definition in economics is that there are insufficient resources to satisfy everyones needs and wants.12/02/2013 Ashraf Alsinglawi 3
  4. 4. Economic Scarcity and theFunction of Choice• You know something is scarce if you try to offer it for free, and you dont have enough of it for everyone who stands in line to get it.• How does a society decide who gets what?• Producers charge a price for it. That way, whoever values it the most will pay the most for it.• Scarcity always leads to choice, and people can actually make better decisions because they have a better understanding of how much each choice costs.12/02/2013 Ashraf Alsinglawi 4
  5. 5. Economic Scarcity and theFunction of Choice• What Is Economics?•  Economics  is the social science that studies how people use scarce resources to satisfy unlimited needs and wants. •  A social science because its about how people interact and why they behave in certain ways.12/02/2013 Ashraf Alsinglawi 5
  6. 6. Economic Scarcity and theFunction of Choice• Incentives  are at the heart of economics. Incentives are rewards that motivate people to behave in certain ways that we want them to.•  Many of the decisions that are made by leaders in government and the central bank are made based on incentives; that is, they have the perspective of trying to help the economy grow faster or slower by changing certain incentives.12/02/2013 Ashraf Alsinglawi 6
  7. 7. Economic Scarcity and theFunction of Choice• What Is An Economy?• An economy is, therefore, a system in which suppliers produce the goods and services that consumers demand.• Its where consumers make choices about what to consume, and producers decide what to produce, how to produce and distribute it.• Economists study the economy by using certain mathematical models, and these models will explain why people behave the way they do.12/02/2013 Ashraf Alsinglawi 7
  8. 8. Summary• Economy  refers to the management of the resources of a country. The basic economic problem  is that needs and wants are unlimited, but resources are scarce. Resources , also known as factors of production, include land, labor, capital and entrepreneurship. • Scarcity  means that resources are limited, and because resources are scarce, people must make choices. • Economics  is the social science that studies how people use scarce resources to satisfy unlimited needs and wants.• Finally, economists study incentives , which are rewards that motivate people to behave in certain ways.12/02/2013 Ashraf Alsinglawi 8
  9. 9. Next >>> Opportunity Cost: Definition & Real World Examples Stay Tuned!12/02/2013 Ashraf Alsinglawi 9
  10. 10. Next >>> Opportunity Cost: Definition & Real World Examples Stay Tuned!12/02/2013 Ashraf Alsinglawi 9

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