Company

LOGOSCARCITY, WANTS, & NEEDS

Mr. Rey Belen

Economic Questions

1. What to produce?1. What to produce?

2. How to produce? 2. How to produce?

3. For whom? 3. For whom?

Basic Economic Concepts

CIRCULARFLOW OF

ECONOMICLIFE

CHOICE TRADEOFF

OPPORTUNITYCOST

PRODUCTION-POSSIBILITYFRONTIER

SCARCITY

UNLIMITED WANTS &

NEEDS

Realities

Scarcity, however, does not imply that the amount of resources or the state of technology is fixed.

Scarcity, however, does not imply that the amount of resources or the state of technology is fixed.

Scarcity limits the total output from the economy

Scarcity limits the total output from the economy

There are not enough resources in the world to satisfy the unlimited wants and needs of all people

There are not enough resources in the world to satisfy the unlimited wants and needs of all people

CHOICE

In a free market economy, CHOICE, is at the very heart of

the systemCONSUMER/HOUSEHOLD BUSINESS

…must 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

…in deciding what to produce and how to produce it, must choose among the available resources – land, labor, capital, and entrepreneurship.

examples…

…remember

COMPETITION will force each business to combine resources to achieve the highest profits

GOVERNMENT must determine how to best utilize the nations resources

determine how much resources should be channeled into collective goods and services in national defense

choose a combination of monetary and fiscal policies to control unemployment and inflation.

…because of SCARCITY, CHOICES are made; and this involves TRADE OFFS

Trade Off

…it is a choice between alternatives uses for a given quantity of resources.

…using one resources for one purpose means that the same resources can not be used for another purpose

The allocation of 30% of the budget for defense means that were resources were drawn away from education, making the nation’s defense capability stronger at the expense of improved education.

…in 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

…usually consist of reallocating the factors of production used to produce the goods chosen by the consumer

Opportunity Cost

it is the real economic cost of a good or service produced, measured by the value of the sacrificed alternative

when you choose to go to college, you gain intellectual skills and an opportunity for a better job in the future

…but, what is the cost of going to college?

money spent on tuition fees, books, board and room. spend years

LISTENING

READING books

to do this, you give up the opportunity of having a job during the time you spend in college.

Production-Possibility Frontier

shows the various combination s of output the economy can produce given the available factors of production and technology that firms can use to turn such factors into output.

points within the PPF shoe inefficient use of the available factors of production and technology because the economy is producing less than it could possibly do

points beyond the PPF show unattainable combinations, because the economy does not have enough resources to achieve such an output combination

points along the PPF show efficient use of the available factors of production and technology

The World of Scarcity“You can’t always get what you want!”

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 people’s wants

“when it cannot make anyone economically better off without making someone else worse off

Scarcity is Different from Shortage

SCARCITY embodies the economic

truism that economic resources are limited

It is an economic phenomenon which is permanent in nature

SHORTAGE temporary situation It occurs when the supply

of goods and services runs low resulting from a greater demand on the part of the consumer.

Scarcity…

scarcity exist in varying degrees:

perhaps would have very little work to do in satisfying his needs if economic resources were no scarce…

scarcity exists and there is no way of escaping from it, we have to understand the consequences that it brings

shortage is no less than a temporary economic phenomenon which can be remedied by adjustment in the marketplace

The nature of Wants

human wants in the broadest sense cover many areas beyond the reach of economic satisfaction…

after one wants has been satisfied, others will surface because human wants are insatiable!

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

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?

Prioritizing Wants

“FREEDOM OF CHOICE”

you have the freedom to decide what you would like to do with your money

you are free to determine the amount of money you will spend and the amount of money you want to put in a bank

you have the freedom to choose the school where you would like to study

freedom to choose the course you would like to take in college

*all these are related to the income you and your parents have

Difference Between Wants and Needs

WANTS refers to all things that

people consume if their income were unlimited

every has unlimited wants which cannot be wholly satisfied because of limited resources

NEEDS undefinable from the

standpoint of an economist

however, the term need is used very casually in most conversation

what people meant, usually, is that they want something they don’t have.

Reality in the world of scarcity: Every want that ends up being satisfied causes one or more wants to remain unsatisfied

The Nature Of Needs

MASLOW’S HIERARCHY OF NEEDS

he based his theory on the study of outstanding person (self-actualized)