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Principles of Economics

Oct 25, 2018 | 0 comments

Oct 25, 2018 | Essays | 0 comments

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Principles of Economics

  1. Scarcity means the relationship between inadequate resources and unlimited human needs. People have indefinite requirements that the available natural resources cannot satisfy. Scarcity can affect decision-making in that one has to make a choice on the need to address at a given time and forego the other necessity. An individual requires a list of preference, which indicates human wants in order of importance to come up with the best choice.
  2. Thinking at the margin means making a comparison between the cost and profits of a supplementary action. For instance, a person may assume other duties and work for extra hours to increase their salary. Another example is taking a very fast bus at an expensive bus to reach a place early instead of a slow bus at a cheaper price.
  3. Markets seem to be a virtuous tactic to establish commercial action because they own the influence to the provision of capitals through regionalized choices of firms.
  4. Government assists increase market result through proper resources allocation. In a situation of monopolistic conflicts, a state can apply market policies to enhance the market competition. The essential function of the government is to stimulate proficiency and fairness eradicating difficulties resulting from market letdown including market influence, externality, and unequal income resource provision.
  5. There is a link between inflation and unemployment in that, a fall in money capacity cause sticky costs in the short run lowers individual expenditure and firms’ sales outcome forcing them to reduce the number of workforces. When one says there is a “short-run” trade of between inflation and unemployment, it means there is a slow reaction of prices towards change in money quantity.
  6. Efficiency means the operative and efficient utilization of the available resources while equality means unbiased resource allocation. A trade-off exists between efficiency and equality because of the scarcity of resources.
  7. Opportunity cost occurs in a condition in which choice making involves tradeoff among options. An example in a small-scale is preceding classes for a part time job. A large-scale example is choosing to invest in a particular project as one foregoes the other.
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