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Understanding Scarcity, Wants and Needs Through Economic Concepts
- 1. Company LOGO SCARCITY, WANTS, & NEEDS Compiled by Vela Moyo
- 2. Economic Questions 1. What to produce? 2. How to produce? 3. For whom?
- 3. Basic Economic Concepts SCARCITY CHOICE CIRCULAR FLOW OF ECONOMIC LIFE TRADE OFF UNLIMITED WANTS & NEEDS OPPORTUNITY COST PRODUCTIONPOSSIBILITY FRONTIER
- 4. Realities There are not enough resources in the world to satisfy the unlimited wants and needs of all people Scarcity limits the total output from the economy Scarcity, however, does not imply that the amount of resources or the state of technology is fixed.
- 5. CHOICE In a free market economy, CHOICE, is at the very heart of the system CONSUMER/HOUSEHOLD BUSINESS âŠmust choose among a variety of goods and services, not of all which can be bought, given a limited budget, between spending now or saving for later; and between hours of work and hour of leisure âŠin deciding what to produce and how to produce it, must choose among the available resources â land, labor, capital, and entrepreneurship.
- 6. Trade Off âŠit is a choice between alternatives uses for a given quantity of resources. âŠusing one resources for one purpose means that the same resources can not be used for another purpose âŠusually consist of reallocating the factors of production used to produce the goods chosen by the consumer The allocation of 30% of the budget for defense means that were resources were drawn away from education, making the nationâs defense capability stronger at the expense of improved education. âŠin a country with a weak economy or a lower standard of living ,most trade off decision are not made by the government but by individual consumers and producers
- 7. The World of Scarcity âYou canât always get what you want!â we live in a world of SCARCITY: society has limited resources, therefore it cannot produce all goods and services that people wish to have. wants always exceed the resources to satisfy them Efficiency calls for the effective use the limited resources to satisfy peopleâs wants âwhen it cannot make anyone economically better off without making someone else worse off
- 8. Scarcity is Different from Shortage SCARCITY ïŒ embodies the economic truism that economic resources are limited ïŒ It is an economic phenomenon which is permanent in nature SHORTAGE ï¶ temporary situation ï¶ It occurs when the supply of goods and services runs low resulting from a greater demand on the part of the consumer.
- 9. Unlimited Wants and Limited Income What are the things that you would like to have? as you think about this question more seriously, you will discover that the list is almost endless⊠it is natural for you to want something more than you have if you do not want something more than you have, you are probably dead
- 10. Limited Resources scarcity of resources is the main reason why we cannot have everything we want Source: National Geographic, October 1998 these must be apportioned in such a way that they will provide the greatest satisfaction to those who need them How are you helping make decisions in the allocation of goods and services in simply being a consumer, give the fact that we have limited resources and man have unlimited wants?
- 11. Difference Between Wants and Needs WANTS ï± refers to all things that people consume if their income were unlimited ï± every has unlimited wants which cannot be wholly satisfied because of limited resources Reality in the world of scarcity: Every want that ends up being satisfied causes one or more wants to remain unsatisfied NEEDS ï¶ undefinable from the standpoint of an economist ï¶ however, the term need is used very casually in most conversation ï¶ what people meant, usually, is that they want something they donât have.
- 12. Company LOGO The Economic Problem: Scarcity and Choice
- 13. âą Natural Resources â the resources from nature that are used in production, including land, raw materials, and natural process âą Capital Resources â the processed materials, equipment, and buildings used in production; also known as capital âą Human Resources â the efforts of people involved in production, including labour and entrepreneurship
- 14. Economic Systems âą Economic systems are the basic arrangements made by societies to solve the economic problem. They include: â Command economies â Laissez-faire economies â Mixed systems
- 15. Economic Systems âą In a command economy, a central government either directly or indirectly sets output targets, incomes, and prices. âą In a laissez-faire economy, individuals and firms pursue their own self-interests without any central direction or regulation.
- 16. Economic Systems âą The central institution of a laissezfaire economy is the free-market system. âą A market is the institution through which buyers and sellers interact and engage in exchange.
- 17. CHAPTER 2 Other thoughts Scarcity and Choice Prepared by: Fernando Quijano and Yvonn Quijano © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 18. What is Production? ⹠Production is the process by which resources are transformed into useful forms. ⹠Resources, or inputs, refer to anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants. ⹠Capital resources ⹠Human resources ⹠Natural resources © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 19. Three Basic Questions ⹠The mechanics of decision making in a larger economy are more complex, but the type of decisions that must be made are nearly identical. ⹠All societies must decide: ⹠What will be produced? ⹠How will it be produced? ⹠Who will get what is produced? © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 20. Three Basic Questions © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 21. Specialization, Exchange and Comparative Advantage ⹠David Ricardo developed the theory of comparative advantage to explain the benefits of specialization and free trade. The theory is based on the concept of opportunity cost: ⹠Opportunity cost is that which we give up or forgo, when we make a decision or a choice. © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 22. Specialization, Exchange and Comparative Advantage ⹠According to the theory of competitive advantage, specialization and free trade will benefit all trading parties, even those that may be absolutely more efficient producers. © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 23. Capital Goods and Consumer Goods ⹠Consumer goods are goods produced for present consumption. ⹠Capital goods are goods used to produce other goods or services over time. © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 24. The Economic Problem ⹠The economic problem: Given scarce resources, how, exactly, do large, complex societies go about answering the three basic economic questions? ⹠Economic systems are the basic arrangements made by societies to solve the economic problem. They include: ⹠Command economies ⹠Laissez-faire economies ⹠Mixed systems © 2002 Prentice Hall Business Publishing Principles of Economics, 6/e Karl Case, Ray Fair
- 25. AND SOME BASIC CONCEPTS
- 27. ANG SAGOT SA TANONG⊠WHY DO WE HAVE TO MAKE A CHOICE? To reach a goal /move forward/ bring change in life / Give us purpose in life/give us a good future and a better life & success Gift of God/ We have the freedom/right to choose/ inevitable/ to make us responsible & independent persons/ choices reflect our values or morals/ you can not have it all/everything To know what is wrong or right and learn from them/live with The consequences of decision/Be on the right track/ path
- 28. GOAL â Attend classes today You CAN NOT DO ALL These activities At the same time! Our TIME is LIMITED or SCARCE
- 29. ECON_FACT 1 ïŹ SCARCITY OF RESOURCES FORCES US TO MAKE A CHOICE! ïŹ Scarcity is knowing that life is this __ OR that __ (Yes!) and not this__ AND__ that (X)
- 31. OPPORTUNITY COST The cost of something given up in order to obtain a good ïŹ The next best alternative that is forgone when we make a decision or a choice ïŹ Cost of the tradeoff is called OPPORTUNITY COST
- 32. LOOKING THROUGH THE EYES OF SCARCITYâŠ ïŹ Choosing one over the other course of action would cost you to give up the next best alternative
- 33. ECONOMIC WAY OF THINKING means⊠Always thinking of the OPPORTUNITY COST OF THE DECISION!
- 34. ECONOMIC WAY OF THINKING means⊠Choosing the action or things that will give more extra or marginal benefits
- 35. Scarcity and its role
- 36. Introduction-: Scarcity means âof limited availabilityâ. E.g. ï During Famine period, food is âscarceâ i.e. Scarcity of food. ï± ï± Scarcity is a fundamental economic problem of having humans who have unlimited wants & needs in world of limited resources.
- 37. When will a resource be consider as âSCARCEâ? ï±A c s i a i t r e s o u r c e i s o n s i d e r e d c a r c e wh e n t s v a i l a b i l i t y s n o t e n o u g h o me e t i t s
- 38. Factors responsible for Scarcity of resources-: 1) Limited supply of resources (natural Scarcity)for example, ï scarcity of water in arid areas like deserts, ï scarcity of food in famine prone areas.
- 39. Contâ ïŹ 2) Limited capabilities of technology or human skill (for example, those needed for enhanced production.)
- 40. Contâ 3) Sometimes the insufficiencies are a result of poor planning and execution(Artificial scarcity).e.g. ï In arid areas, proper planning is required for proper supply of water.
- 41. Is it Possible to Have no Scarcity? If proper planning & techniques are used for utilization and supply of insufficient resource, then condition of its to be scarce âminimizesâ. ï± ï± If âneedsâ=âhaveâ
- 42. Impact of Scarcity on Market? ï± ï± ïŹ ï If something is scarce - it will have a market value. It will result in inflation. If the supply of a good or service is low, the market price will rise, providing there is sufficient demand from consumers. Whereas when there is excess supply in a market, we expect to see prices falling. For example, If we talk about services, IITians vs. Engineer from UPTU colleges.
- 43. References Names: Shubham Singhal ïŹ Akash Bharti ïŹ Fernando Quijano ïŹ Yvonn Quijano ïŹ Mr. Rey Belen ïŹ