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AS Scarcity, choice and allocation
This document discusses economic objectives and resource allocation. It identifies the four main players in the economy - entrepreneurs/firms, owners of factors of production, consumers, and governments - and how they interact. Resources are allocated through the free market to maximize welfare. Prices serve as incentives that drive this system by signaling supply and demand to producers and consumers.
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AS Scarcity, choice and allocation
- 1. AS Economics Scarcity, choiceand allocation
- 2.
- 3. Today’s objectives • Discussdifferent economic objectives • Look at how resources are allocated to different groups
- 4. The 4 mainplayers in the economy All have competing and different interests What are they?
- 5. Welfare maximisation • Ineconomics, we start by assuming that everyone wants to maximise their financial rewards • This will give them the greatest amount of welfare/happiness
- 6. Allocation of resourcesin a free market economy = equilibrium Entrepren- eurs Firms Owners of factors of production Consumers Sell their resources to the entrepreneurs / firms for the greatest amount (wages/payment/rent…) Produce goods that people want to buy in order to maximise profits Buy the goods that give them the maximum satisfaction with limited income
- 7. Incentive to maximise •What drives the whole system is the incentive to maximise • The key signal is price • Explain the chain reaction when: 1) Consumers buy a new product 2) There are more workers available 3) There are fewer workers available 4) A new firm comes into the market
- 8. If you werea clever moth what would you do having found an area of profit? What assumptions lie behind these ideas?
- 9. Today’s objectives • Discussdifferent economic objectives • Look at how resources are allocated to different groups
- 10. The role ofprices and profits 1. Identify prices of a specific good or service that may be rising in the economy 2. Try to identify the reasons you think prices are rising 3. How would you expect this to impact on: a. Consumers? b. Firms currently operating in that market? c. Firms operating outside that market?