Basic economic concepts


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Basic economic concepts

  1. 1. Scarcity
  2. 2. Scarcity is the condition or situation that occurs when people's wants and needs are unlimited, while resources need to meet them are limited.
  3. 3. Concepts or Ideas that are important in understanding scarcity:
  4. 4.  Choices -Individuals, businesses and governments all make choices in the daily course of their actions in any type of economy.
  5. 5.  Companies and organization make choices on the basis of projected profit, efficiency, market forces, and competition. In their decisions they have to input the reality of scarcity, as limited resources.
  6. 6.  Opportunity cost it is the real cost or value of a product or service compared to an alternative.
  7. 7. For example, if you choose to play volleyball instead of reviewing for your examinations, then you have lost the opportunity to review and the reviewing time is considered as the opportunity cost.
  8. 8. Production Possibility Frontier: Shows the problems encountered by countries in general and governments in particular.
  9. 9. In the interplay between free market forces and government, the most difficult part would be deciding what goods and services should be produced and how, considering the limited and even fixed amount of resources available.
  10. 10. Scarcity as a social Problem. The answer to scarcity would be proper allocation of resources. Allocation is a key economic concept.
  11. 11. Scarcity and Shortage
  12. 12. Scarcity is an naturally-occurring phenomenon in the world, and people and countries produce goods exactly as a continuing response to scarcity.
  13. 13. Shortage is a temporary breakdown or slowdown in the supply of goods and services.
  14. 14. Making Sustainable Use of Resources: Because of scarcity, people and governments need to be more responsible in their use of resources and renewable resources should, at least, be made sustainable.
  15. 15. The sustainable use of resources is not only a wise response to the problem of scarcity. It also guarantees that present and future generations will have something to utilize in the years ahead.
  16. 16. The Allocation Of Resources
  17. 17. Allocation is deciding what and how much will be produces with the limited resources available; how goods and services will be produced; and for whom will the goods and services be produced.
  18. 18. The Three Key Economic Question
  19. 19. What to produce? Society must know and give priority to what are essential in life- things such as food, clothing, and shelter.
  20. 20. Resources must be allocated for producing one product over another- and in this manner society must be able to choose well what is good for it.
  21. 21. How to produce? How to produce certain goods and services is also very important because it guides government and private planners about how to allocate resources for production.
  22. 22. For whom to produce? Even goods and services are produced, the ones who will use them should be first determined. Most of the time, who gets what kind of goods and services is determined by market forces and the kind of distribution.
  23. 23. Equitable Allocation of Resources
  24. 24.  Scarce government funds- the equitable allocation of resources requires funds for distribution of goods and services, infrastructure, and transfers of technology, among others.
  25. 25.  Poverty and Uneven Distribution of income- because of widespread of poverty in many countries, many sectors within them are not able to have access to certain goods and services.
  26. 26.  Overpopulation – when there are too many people in a given community or country, scarce resources would be very limited, and there will not be enough to allocate.
  27. 27. Allocation in different economic systems  An economic system is the combination or sum total of individual and social economic decisions, institution, and permanent customs which are an integral part of a country's economy.
  28. 28. Four Basic economic systems
  29. 29.  Traditional economies- these are economies where economic decisions are made through social customs and traditions.
  30. 30. 2. Market economies- these are economies where economic decisions are made by individuals in a given marketplace. The best example of this type of economy is capitalism, where the means of production is controlled and owned by individuals
  31. 31. The following are some of the features of a market economy: • Free enterprise • Emphasis on profit • competition
  32. 32.  Command economies- these are economies where economic decisions are made, decided upon, and even dictated by government.
  33. 33. Among the features of a command economy are the following: • State ownership • Focus on equitable distribution
  34. 34.  Mixed economies- these are economies where economic decisions are made by the combination of or interplay between market decisions and government policies.
  35. 35. Scarcity, Allocation and Population
  36. 36. The government and allocation The government, being the prime agency tasked by the people to work for its welfare, has a leading role in the allocation of resources. Among its chief functions in this regard are the following:
  37. 37. Protection of materials, producers, and consumers The government ensures that resources are properly utilized, produced and distributed as equitable as possible. It protects the factors that are involved in this process:
  38. 38.  The natural resources and the environment, which are the source of raw materials are protected from the abuse of greedy businessmen;
  39. 39. 2. The companies, factories and industries that transform raw materials into products from unfair competition and are guaranteed with non-interference by the state;
  40. 40. 3. The workers composing the labor force, who are the main hands in production are protected from unfair labor practice and work hazards, and provided with job security and;
  41. 41. 4. The consumers, the targets of these products and services who are protected from low-quality goods, overpricing and misleading promotion by the producers
  42. 42. Production and Distribution of goods and services Private business organizations are the ones usually involved in the production and distribution of goods and services in market economies such as united states and the Philippines.
  43. 43. Regulation and Deregulation These are two types of policies that are frequently used by governments in having some control over businesses and thus over the allocation of resources.
  44. 44. Regulation is limiting the use of resources by a particular industry, and is usually imposed on industries that have access to a very limited resource. Deregulation is done to lessen the control of monopolies or a group of private business.
  45. 45. Wants and Needs
  46. 46. Difference between wants and needs A need is something that you must have. Some examples of needs are:  Food  Water  Clothing  Shelter
  47. 47. A want is something that you would like to have, although it is not absolutely necessary. Some examples of wants are:     Spaghetti Coffee Designer jeans Mansion
  48. 48. The theory of needs