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Microeconomics

Course: microeconomics   >   unit 1.

  • Introduction to economics
  • Scarcity and rivalry
  • Four factors of production

Economic models

  • Normative and positive statements

Lesson summary: Scarcity, choice, and opportunity costs

Key takeaways, scarcity and choice, positive vs. normative analysis, common errors.

  • Not all costs are monetary costs. Opportunity costs are usually expressed in terms of how much of another good, service, or activity must be given up in order to pursue or produce another activity or good.
  • You might hear the fourth economic resource referred to as either entrepreneurship or technology. The terms are used interchangeably but mean the same thing: the ability to make things happen. Take the example of computers—a computer itself would be considered a good, but our ability to make computers would be considered technology.
  • The word capital is used in everyday language to mean what economists would call financial capital . If you see the word capital on its own in an economics context, it refers to physical capital —equipment, machinery, or tools used to produce goods and services. Physical capital is tangible, but financial capital isn't always so.

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Work Out Economics GCSE pp 5–14 Cite as

Basic Economic Problems

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Humans have many different types of wants and needs. Economics looks only at man’s material wants and needs. These are satisfied by consuming (using) either goods (physical items such as food) or services (non-physical items such as heating).

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Young, R. (1987). Basic Economic Problems. In: Work Out Economics GCSE. Macmillan Work Out Series. Palgrave, London. https://doi.org/10.1007/978-1-349-09348-9_2

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Project evaluation: essays and case studies, vol. i, essay 1: basic economic concepts.

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Basic Economic Problem

  • The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources .
  • Scarcity means there is a finite supply of goods and raw materials.
  • Finite resources mean they are limited and can run out.
  • Unlimited wants mean that there is no end to the quantity of goods and services people would like to consume.
  • Because of unlimited wants – People would like to consume more than it is possible to produce (scarcity)

Fundamental economic question

basic economic problem essay pdf

Therefore because of scarcity, economics is concerned with:

  • What to produce?
  • How to produce?

Examples of the economic problem

Households have limited income and they need to decide how to spend their finite income. For example, with an annual income of £20,000, a household may need to spend £10,000 a year on rent, council tax and utility bills. This leaves £10,000 for deciding which other food, clothes, transport and other goods to purchase.

Householders will also face decisions on how much to work. For example, working overtime at the weekend will give them extra income to spend, but less leisure time to enjoy it. A worker may also wish to spend more time in learning new skills and qualifications. This may limit their earning power in the short-term, but enable a greater earning power in the long-term.  For example, at 18 a student could go straight into work or they could go to university where they will hope to gain a degree and more earning power in the long-term.

A producer needs to remain profitable (revenue higher than costs). So it will need to produce the goods which are in high demand and respond to changing demands and buying habits of consumers – for example, switching to online sales as the high street declines. Producers will need to constantly ask the best way of producing goods. For example, purchasing new machines can increase productivity and enable the firms to produce goods at a lower cost. This is important for fast-changing industries where new technology is frequently reducing costs of production. Without firms adapting to how they produce, they can become unprofitable.

Firms may also need to make long-term investment decisions to invest in new products and new means of production.

The government has finite resources and its spending power is limited by the amount of tax that they can collect. The government needs to decide how they collect tax and then they need to decide whom they spend money on. For example, the government may wish to cut benefits to those on low income to increase incentives to work. However, cutting benefits will increase inequality and relative poverty.

Opportunity cost and the economic problem

The economic problem can be illustrated with the concept of opportunity cost.

Opportunity cost is the next best alternative foregone. A consumer with a limited income of £20,000 year continually faces choices, if they spend £3,000 on a new car, then that is £3,000 they cannot spend on food and drink

If a student spends three years in education, the opportunity cost is the lost potential of earning from a full-time job.

A government may have choices on how to spend limited resources. In this simple model, they have a choice between health care and military spending. If they increase spending on the military, the opportunity cost is less spending on health care.

ppf-curve-health-military

Key Concepts and Summary

1.1 what is economics, and why is it important.

Economics seeks to solve the problem of scarcity, which is when human wants for goods and services exceed the available supply. A modern economy displays a division of labor, in which people earn income by specializing in what they produce and then use that income to purchase the products they need or want. The division of labor allows individuals and firms to specialize and to produce more for several reasons: a) It allows the agents to focus on areas of advantage due to natural factors and skill levels; b) It encourages the agents to learn and invent; c) It allows agents to take advantage of economies of scale. Division and specialization of labor only work when individuals can purchase what they do not produce in markets. Learning about economics helps you understand the major problems facing the world today, prepares you to be a good citizen, and helps you become a well-rounded thinker.

1.2 Microeconomics and Macroeconomics

Microeconomics and macroeconomics are two different perspectives on the economy. The microeconomic perspective focuses on parts of the economy: individuals, firms, and industries. The macroeconomic perspective looks at the economy as a whole, focusing on goals like growth in the standard of living, unemployment, and inflation. Macroeconomics has two types of policies for pursuing these goals: monetary policy and fiscal policy.

1.3 How Economists Use Theories and Models to Understand Economic Issues

Economists analyze problems differently than do other disciplinary experts. The main tools economists use are economic theories or models. A theory is not an illustration of the answer to a problem. Rather, a theory is a tool for determining the answer.

1.4 How To Organize Economies: An Overview of Economic Systems

We can organize societies as traditional, command, or market-oriented economies. Most societies are a mix. The last few decades have seen globalization evolve as a result of growth in commercial and financial networks that cross national borders, making businesses and workers from different economies increasingly interdependent.

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basic economic problem essay pdf

1.1 – 1.4 – The Basic Economic Problem

“Economics is the social science that describes the factors that determine the production, distribution and consumption of goods and services.” (Source: Wikipedia)

The Nature of the Economic Problem

Resources: are the inputs required for the production of goods and services.

Scarcity:  a lack of something (in this context, resources). The fundamental economic problem is that there is a scarcity of resources to satisfy all human wants and needs. There are finite resources and unlimited wants. This is applicable to consumers, producers, workers and the government, in how they manage their resources. Economic goods are those which are scarce in  supply and so can only be produced with an economic cost and/or consumed with a price. In other words, an economic good is a good with an opportunity cost. All the goods we buy are economic goods, from bottled water to clothes. Free goods, on the other hand,  are those which are abundant in supply, usually referring to natural sources such as air and sunlight.

The Factors of Production

Resources are also called ‘factors of production’ (especially in Business). They are:

  • The reward for land is the rent it receives.
  • Since, the amount of land in existence stays the same, its supply is said to be fixed . But in relation to a country or business, when it takes over or expands to a new area, you can say that the supply of land has increased, but the supply is not depended on its price, i.e. rent.
  • The quality of land depends upon the soil type, fertility, weather and so on.
  • Since land can’t be moved around, it is geographically immobile but since it can be used for a variety of economic activities it is occupationally mobile .
  • The reward for work is wages /salaries.
  • The supply of labour depends upon the number of workers available (which is in turn influenced by population size, no. of years of schooling, retirement age, age structure of the population, attitude towards women working etc.) and the number of hours they work (which is influenced by number of hours to work in a single day/week, number of holidays, length of sick leaves, maternity/paternity leaves, whether the job is part-time or full-time etc.).
  • The quality of labour will depend upon the skills, education and qualification of labour.
  • Labour mobility can depend up on various factors. Labour can achieve high occupational mobility (ability to change jobs) if they have the right skills and qualifications. It can achieve geographical mobility (ability to move to a place for a job) depending on transport facilities and costs, housing facilities and costs, family and personal priorities, regional or national laws and regulations on travel and work etc.
  • The reward for capital is the interest it receives.
  • The supply of capital depends upon the demand for goods and services, how well businesses are doing, and savings in the economy (since capital for investment is financed by loans from banks which are sourced from savings).
  • The quality of capital depends on how many good quality products can be produced using the given capital. For example, the capital is said to be of much more quality in a car manufacturing plant that uses mechanisation and technology to produce cars rather than one in which manual labour does the work.
  • Capital mobility can depend upon the nature and use of the capital. For example, an office building is geographically immobile but occupationally mobile. On the other hand, a pen is geographically and occupationally mobile.
  • The reward to enterprise is the profit generated from the business.
  • The supply of enterprise is dependent on entrepreneurial skills (risk-taking, innovation, effective communication etc.), education, corporate taxes (if taxes on profits are too high, nobody will want to start a business), regulations in doing business and so on.
  • The quality of enterprise will depend on how well it is able to satisfy and expand demand in the economy in cost-effective and innovative ways.
  • Enterprise is usually highly mobile, both geographically and occupationally.

All the above factors of productions are scarce because the time people have to spend working, the different skills they have, the land on which firms operate, the natural resources they use etc. are all in limited in supply; which brings us to the topic of opportunity cost.

Opportunity Cost

The scarcity of resources means that there are not sufficient goods and services to satisfy all our needs and wants; we are forced to choose some over the others. Choice is necessary because these resources have alternative uses- they can be used to produce many things. But since there are only a finite number of resources, we have to choose.

When we choose something over the other, the choice that was given up is called the opportunity cost. Opportunity cost , by definition, is the next best alternative that is sacrificed/forgone in order to satisfy the other . Example 1: the government has a certain amount of money and it has two options: to build a school or a hospital, with that money. The govt. decides to build the hospital. The school, then, becomes the opportunity cost as it was given up. In a wider perspective, the opportunity cost is the education the children could have received, as it is the actual cost to the economy of giving up the school. Example 2: you have to decide whether to stay up and study or go to bed and not study. If you chose to go to bed, the knowledge and preparation you could have gained by choosing to stay up and study is the opportunity cost.

Production Possibility Curve Diagrams (PPC)

Because resources are scarce and have alternative uses, a decision to devote more resources to producing one product means fewer resources are available to produce other goods. A Production Possibility Curve diagram shows this, that is,  the maximum combination of two goods that can be produced by an economy with all the available resources .

ppc

Let’s look at the PPC named A. At point X and Y it can produce certain combinations of good X and good Y. These are points on the curve- they are attainable, given the resources. Th economy can move between points on a PPC simply by reallocating resources between the two goods. If the economy were producing at point Z , which is inside/below the PPC, the economy is said to be inefficient , because it is producing less than what it can. Point W , outside/above the PPC, is unattainable because it is beyond the scope of the economy’s existing resources. In order to produce at point W, the economy would need to see a shift in the PPC towards the right. For an outward shift   to occur, an economy would need to:

  • discover or develop new raw materials. Example: discover new oil fields
  • employ new technology and production methods to increase productivity
  • increase labour force by encouraging birth and immigration, increasing retirement age etc.

An outward shift in PPC, that is higher production possibility, will lead to economic growth.

In the same way, an inward shift can occur in the PPC due to:

  • natural disasters, that erode infrastructure and kill the population
  • very low investment in new technologies will cause productivity to fall over time
  • running out of resources, especially non-renewable ones like oil or water

An inward shift in the PPC will lead to the economy shrinking.

How is opportunity cost linked to PPC? Individuals, businessmen and the government can calculate the opportunity cost from PPC diagrams. In the above example, if the firm decided to increase production of good Y from 500 to 750, it can calculate the opportunity cost of the decision to be 250  units of good X (as production of good X falls from 1000 to 750). They are able to compare the opportunity cost for different decisions.

Notes submitted by Lintha

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21 thoughts on “ 1.1 – 1.4 – The Basic Economic Problem ”

Thanks for the notes but what about utility?

‘Utility’ is not covered in IGCSE Economics (0455).

what about durable and non-durable goods?

That distinction is not important to this unit. You can of course use it in your exams if you want.

I really like your notes

Like Liked by 3 people

I am a youtuber and make videos of economic so may i take the help of these Great Notes Thank you .

Like Liked by 1 person

These notes are protected by copyright, so I would advise against using large chunks of them, but quoting small lines or referencing our notes should be fine, provided that you give us the necessary credit! Thank you so much for asking, by the way 🙂

Will it help if I only study these notes for an exam??

Will reading and memorising only these help before my exams or should I even do my textbook?

Don’t memorise! Understand the concepts and frame your own answers. These are revision notes, so you shouldn’t rely on these as the only study reference. Learn from the textbook first and use these notes to revise before the exams.

do your textbook too. Try memorizing it and applying it ( by trying questions from your textbook or online resources.)

Thank you for these notes, quite helpful!

Are these notes able to be downloaded as a pdf?

Not currently. We are, however, working on downloadable and printable versions of our notes that are available for purchase. If you are interested, stay tuned!

Informitive post. Thanks!

Fabulous notes Thank You!!! It helped me finish a chapter really fast

Glad we could help!

the new textbook that most IGCSE students are following is here:

https://www.snapdeal.com/product/cambridge-igcse-and-o-level/638329370736?gclid=CjwKCAjw1f_pBRAEEiwApp0JKOodntAbFTtgjv41tyGgNvNlIaEm6HN7Fy7tDVJHeD3xfs9aTDh_mBoCoCcQAvD_BwE&supc=SDL774300854&utm_source=earth_web&utm_medium=614_1515&utm_content=638329370736&vendorCode=Seb79d&isSellerPage=true&fv=true&utm_source=earth_pla&utm_campaign=40-60_nm&utm_term=70802652213&utm_medium=70802652213&s_kwcid=AL!660!3!352864509795 !!!g!411540340457!&ef_id=XMMmDgAAEfa1b8Fc:20190730153031:s

so sorry for all the trouble

could you please add the notes for macro and microeconomics. pls as I am having great trouble searching for it all over the internet. thanks in advance

It is available here. https://igcseaid.com/notes/economics-0455/2-1-2-9-how-markets-work/

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The Scarcity Assumption, Economic Problem and the Definition of Economics Revisited

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Wahabalbari Ahmed

Abstract Purpose – The aim of this paper is to reconcile the diverging opinions among Islamic economists toward the concept of scarcity and to present a holistic model of scarcity and abundance from a Qur’anic perspective. Design/methodology/approach – Analyses of both interviews and texts were performed. The method in studying scarcity from Islamic perspective consisted of semi-structured interview with five experts in the field of Islamic economics and development. Findings – One major implication of this study is that the concept of scarcity as it is postulated by mainstream economics tends to clash with the Islamic worldview, as it does not have any reference in Islam. Scarcity can act as a phenomenon in economic activities but not as the defining concept in Islamic economics. Practical implications – Practically, this paper will contribute to the making of the first lecture of the course of Islamic economics. Social implications – Socially, this paper will contribute to the process of transforming the science of economics and Islamic economics for a sustainable tomorrow. Originality/value – This paper is a fundamental paper that addresses some aspects from critical realism and transcendental idealism into the making of Islamic economics. Not only that the discussion on the concept of scarcity in Islamic economics is limited and seems to be lacking; in addition, this paper offers a critical discussion on the validity of the concept of scarcity in economics from a critical perspective. Keywords Critical realism, Islamic economics, Scarcity, Abundance, Heterodox economics, Qur’an Paper type Conceptual paper

basic economic problem essay pdf

This paper explains how the concept of scarcity functions as the central pillar of conventional economics and indeed is central to its definition. Islamic economists have attempted to define Islamic economics from the same conventional economics perspective and consequently they too rely heavily on the concept of scarcity. However, the concept of scarcity thus stems from a non-religious basis. It has been shown by psychological studies that the so-called scarcity mentality (the perception of lack) results in competitive aggression, fear, anxiety and social conflict. By contrast, the concept of God Power from which is derived the abundance mentality, and which is advocated by all religions, results in cooperativeness, trust, security, love and reciprocated generous behavior, which in turn encourages social cohesion. This paper presents verses from the Qur’an pertaining to the concept of God Power and Divine rule, and it suggests a definition and conceptual framework for Islamic Economics based on the concept of God Power and fulfilment of the Divine rule. JEL Classification: B59, D01, D11, D99, Z12.

Understanding Economic Philosophy of Quran

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This paper attempts to understand the economic philosophy of the Holy Qur'ân with the help of five celebrated contemporary commentaries (Tafasîrs) and the notable scholars of Islamic Economics. The purpose of this study is to identify whether Qur'ânic teachings provide us with a basis for a complete thinking on economic life of human beings and nations as the conventional economic thinking provides. Whether the Qur'ânic approach to economic life differs markedly from the conventional approach and whether Qur'ânic basis for thinking on Economic matters lead us to some new areas and dimensions not covered by conventional thinking.

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This is in continuation of the essay earlier published as an introduction to “Why Islamic Economics cannot be understood with in Economics”. This essay explained that there were several reasons to justify that we did need a different analytical framework to scientifically explain economic behavior of man in the background of divine knowledge that we get from our religion. The current analytical framework of conventional Economics is neither relevant nor broad enough to realistically understand economic behavior of people with different worldview or living under different cultures on the globe. The essay identified various reasons for this. The first set of reasons, related with the objective of economic activity, was discussed in detail in the above-mentioned essay. The present essay explains in some detail the second set of reasons that relate to the economic concepts conveniently ignored by mainstream Economics. We believe in these concepts not only because they came to us through divine sources but also because we find them more logical concepts relevant for describing the reality. We find these concepts more relevant to describe reality about economic matters or economic activity or economic behavior or economic decision-making of man and we find them as amenable to scientific analysis as any other social science can be. The need for developing an alternative framework for economic analysis recognizing these concepts is a need not merely in the interest of developing Islamic Economics but it is in fact in the interest of making the subject of Economics more scientific, relevant and realistic. This series of essay aims at developing a different framework for economic analysis that will give more realistic and pluralistic social science dealing with the art of living in the world, call it Economics, or Islamic Economics or any other name.

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Pakistan Journal of Qur'ānic Studies

Pakistan Journal of Qur'anic Studies

The economic problem has always been a major concern of the social scientists. The economists throughout the history have attempted to address the issues of poverty, inflation and economic instability in conventional economic systems like capitalism and socialism. The fact remains undeniable that so far these sincere efforts have not been able to achieve the goal of social well-being and economic prosperity. Islamic Economics is a relatively new paradigm and based on revelation and moral values which are new concept in conventional economic systems. In the research article, it has been discussed in a logical and deductive method from the sources of Quran and Sunnah that how Islamic Economics addresses the issue of economic problem. Moreover, how the relative scarcity of economic resources has been discussed in Islamic economics. The paper concludes that it is not the issue of relative scarcity and shortage of the resources that causes the economic problems, but it is the secular way of thinking based on greed, faithlessness, materialistic approach, selfishness and immoral behaviour of the people which creates problems.

Abstract - Mainstream economics postulates the concept of scarcity as a defining notion, while heterodox economics denies the proposition of scarcity. In contrast, there is no clear stand among Islamic economists towards the concept of scarcity. This paper explores the concept of scarcity ideologically and examines empirically the effect of scarcity thinking on human wants. The concept of scarcity is one of the unresolved issues in Islamic economics. Conceptually, this paper aims to explore and uncover the ideological basis of the concept of scarcity in the writings of Malthus and Robbins with reference to the Islamic perspective. In so doing, analysis of texts was performed. In contrast to positivism, which relies on sensible observation, this paper attempts to analyze the concept of scarcity and abundance from the perspectives of critical realism. Critical realism goes beyond the Seen phenomena to include elements from the Un-Seen reality. Empirically, this paper attempts to explore the effect of scarcity thinking on human wants among Muslims. With reference to social psychology and specifically to commodity theory, scarcity enhances desires in people. Consequently, this paper attempts to abstract scarcity thinking out of the concept of scarcity that defines mainstream economics. Scarcity thinking means that there is not enough for everyone to go around. In doing so, this paper has constructed a measurement strategy around Scarcity Thinking, Human Wants and Islamic Religiosity. The quantitative data used for this empirical research was collected through a questionnaire administered on 345 Muslim individuals working within the Federal Territory of Kuala Lumpur, Malaysia. A measurement and structural model were formulated through adopting the structural equation modeling approach (using AMOS version 18). This paper concluded that Scarcity Thinking enhances Human Wants significantly and has the opposite relationship to Islamic Religiosity. One major implication of this paper is that the concept of scarcity of mainstream economics reflects scarcity thinking in which Scarcity thinking is causing a dissonance between Islamic Religiosity of moderation in expenditure and excessive buying behavior of Human Wants. Therefore, the concept of scarcity and its thinking state inflates human wants and contradicts the Islamic worldview of cooperation and obedience. Keywords: scarcity thinking, religiosity, human wants, social psychology, heterodox economics

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  1. Essay Economic Problem

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  2. What is The Basic Economic Problem?

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  3. IGCSE ECONOMICS: basic economic problem

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  4. Basic Economic Problem

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  5. The Three Basic Economic Problems

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  6. The Basic Economic Problem and Opportunity Cost

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  1. The Economic Problem

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COMMENTS

  1. PDF THE BASIC ECONOMIC PROBLEM Section 1

    Figure 1.1 The economic problem Scarce resources The economic problem Choices have to be made Unlimited wants 1.3 Economic goods and free goods Almost everything that is provided is an economic good. This is because resources are required to produce such goods these resources include raw materials, labour and business know-how. Free goods

  2. PDF Economics: Chapter 2 section: 1 The Basic Economic Problem

    The Basic Economic Problem The existence of scarcity creates the basic economic problem faced by every ... how to make the best use of limited productive resources to satisfy human needs and wants. To solve this basic problem, every society must answer these three basic questions: 1. What goods and services will be produced? For example, an ...

  3. (PDF) Basic Economic problem(1)

    This volume explores, develops, and critiques the rich literature on costs, examining some of the many ways cost remains relevant in economic theory and practice. The book especially studies costs from the perspective of the Austrian or "causal-realist" approach to economics. The chapters integrate the history of economic thought with ...

  4. PDF Chapter 1 Basic economic ideas and resource

    Basic economic ideas and resource allocation Chapter 1 Learning summary After you have studied this chapter, you should be able to: de ne the fundamental economic problem explain the meaning of scarcity, opportunity cost and the basic economic questions de ne ceteris paribus recognise the importance of decision making at the margin

  5. PDF The basic economic problem SECTION 1

    What is meant by the economic problem? (2) b Explain why a car is an economic good. (4) GROUP ACTIVITY 2 In your group, discuss and decide whether each of the following is an economic or a free g ood: a air b education c newspapers d public libraries e state education. Chapter 1: The nature of the economic problem

  6. PDF Writing Economics

    to succeed as a writer of economics and offers an overview of the writing process from beginning to end. Chapter 2 describes the basic methods economists use to analyze data and communicate their ideas. Chapter 3 offers suggestions for finding and focusing your topic, including standard economic sources and techniques for doing economic research.

  7. PDF A Guide to Writing in Economics

    II, "Researching Economic Topics," tries to explain the scholarly and analytical approach behind economics papers. The third part, "Genres of Economics Writing," briefly surveys some of the kinds of papers and essays economists write. It is in the fourth part, "Writing Economics," that the manual homes in on discipline-specific writing.

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    Professor of Economics, University of California, Los Angeles. and. Gustavus F. and Ann M. Swift. Distinguished Service Professor Emeritus. University of Chicago. June 2003. This course focuses on three basic topics -- inflation, real exchange rate economics, and. the process of economic growth. But its ultimate purpose is better thought of as ...

  9. PDF Writing Tips For Economics Research Papers

    Sharpening your economics writing skills is crucial in communicating top-notch research effectively. Remember, your paper's impact may suffer if your writing is: • grammatically flawed, • unclear, or • excessively journalistic. Writing an economics paper without proper grammar is like balancing an economic model on a

  10. PDF Writing Economics A Guide for Harvard Economics Concentrators

    Published annually, the Economic Report of the President includes: (1) current and foreseeable trends in and annual goals for employment, production, real income, and Federal budget outlays; (2) employment objectives for significant groups of the labor force; and (3) a program for carrying out these objectives.

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    Scarcity is the basic economic problem because each level of economic has unlimited wants and limited resources. Economic has various level (individually, firms and governments). Because of the "Time" is scarcity/limited as individually, we as "individually" has to make decision wisely. For example we as individuals want a lot of money and also ...

  12. 1.1 What Is Economics, and Why Is It Important?

    A basic understanding of economics makes you a well-rounded thinker. When you read articles about economic issues, you will understand and be able to evaluate the writer's argument. When you hear classmates, co-workers, or political candidates talking about economics, you will be able to distinguish between common sense and nonsense.

  13. PDF 1 Basic Economic Problems

    1 Basic Economic Problems 1.1 Scarcity (a) Unlimited Wants Humans have many different types of wants and needs. Economics looks only at man's material wants and needs. These are satisfied by consuming (using) either goods (physical items such as food) or services (non-physical items such as heating).

  14. Vol. I, Essay 1: Basic Economic Concepts

    pdf. 847 kB Vol. I, Essay 1: Basic Economic Concepts ... Essay 1: Basic Economic Concepts Download File DOWNLOAD. Course Info Instructor Carl D. Martland; Departments Civil and Environmental Engineering ... assignment Problem Sets. group_work Projects. Download Course. Over 2,500 courses & materials Freely sharing knowledge with learners and ...

  15. Basic Economic Problem

    The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources. Scarcity means there is a finite supply of goods and raw materials. Finite resources mean they are limited and can run out. Unlimited wants mean that there is no end to the quantity of goods and services people would like to ...

  16. (PDF) • Basic Economic Principles: The short guide, everything you need

    In this paper I will define economics following a different general approach to economic problems, an approach that, because of its emphasis on meaning, has been called 'radical subjectivism' (Storr, 2017). ... BASIC ECONOMIC PRINCIPLES The Short Guide: Everything You Need to Know About Economics Author Firend Alan Rasch, PhD Publication of ...

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    The Basic Economic Problem section i CambridgeU nivrsie y tPrses 978-1-107-61233-4 - Cambridge IGCSE : Economics Susan Grant Excerpt ... • The economic problem of scarcity arises because wants exceed resources. Teacher's Tip It is very important to learn definitions. The more you apply a term such as scarcity in

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    Economists analyze problems differently than do other disciplinary experts. The main tools economists use are economic theories or models. A theory is not an illustration of the answer to a problem. Rather, a theory is a tool for determining the answer. 1.4 How To Organize Economies: An Overview of Economic Systems

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    The basic economic problem is the scarcity of resources. People want more than can be met with their available resources. The human needs are unlimited because they grow and evolve while the means of fulfilling the needs (financial assets) are limited (Stiglitz 1992: 48). The effort to overcome the relative lack of goods, in other words to ...

  20. PDF Multiple-choice questions and essays in assessing economics

    The student's amount of economic knowledge allows him or her to learn how to find original ways out of non-standard economic problems, to offer solutions to problematic situations and to forecast the development of economic phenomena and processes. Most classes in economics use both multiple-choice questions and essays as assessment tools.

  21. 1.1

    Scarcity: a lack of something (in this context, resources). The fundamental economic problem is that there is a scarcity of resources to satisfy all human wants and needs. There are finite resources and unlimited wants. This is applicable to consumers, producers, workers and the government, in how they manage their resources.

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    The definition also certifies that there is no economic problem on grounds of scarcity. But there is an economic problem in the sense of "rational" utilizing resources to fulfill the needs. This is the type of economic problem which is visible in almost all societies in varying degrees. The scarcity axiom will not help identifying this problem.

  23. Briefly Describe The Basic Economic Problem Full PDF

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