List the basic problem of scarcity and how it drives economic decison-making.
Describe the role of factors of production.
What is supply and demand?
Apply the principles of supply and demand that predicts market prices and incentives for buyers and sellers.
If you don't know what supply and demand are, then you obviously haven't studied your course materials.
i have
Clearly you haven't, or you would be able to get a good start on all these exam questions.
separation of power(distribution power horizontal arrengment)during H/sillasse, dergue andpost1991?
1. The basic problem of scarcity arises from the fact that resources are limited while human wants and needs are unlimited. This scarcity forces individuals, businesses, and governments to make choices to allocate these scarce resources efficiently and effectively. Economic decision-making is driven by scarcity because it requires individuals and entities to prioritize which goods and services to produce, how to produce them, and for whom to produce them.
To understand how scarcity drives economic decision-making, one can examine the concept of opportunity cost. When resources are limited, choosing to produce or consume one good or service means sacrificing the opportunity to produce or consume an alternative. Thus, individuals and entities weigh the costs and benefits of different choices based on their scarcity to make rational economic decisions.
2. Factors of production refer to the resources used in the production of goods and services. There are four main factors of production:
- Land: It includes all natural resources, such as raw materials, water, minerals, and land itself.
- Labor: This factor refers to the human effort and skill involved in the production process.
- Capital: It includes all man-made resources used in the production process, such as machinery, tools, buildings, and infrastructure.
- Entrepreneurship: This factor represents the ability to organize the other factors of production and take risks in order to create and manage a business.
These factors of production work together to create goods and services, and their combination is essential for economic output.
3. Supply and demand are fundamental concepts in economics that explain how prices are determined in a market.
- Supply: It represents the quantity of a good or service that producers are willing and able to offer for sale at various prices during a given period of time. Supply is influenced by factors such as production costs, technology, resource availability, and the number of producers in the market. The relationship between price and quantity supplied is typically positive - as the price increases, the quantity supplied increases.
- Demand: It represents the quantity of a good or service that consumers are willing and able to buy at various prices during a given period of time. Demand is influenced by factors such as consumers' preferences, income, price of related goods, and population size. The relationship between price and quantity demanded is typically negative - as the price decreases, the quantity demanded increases.
4. The principles of supply and demand interact to determine market prices and incentives for buyers and sellers. When the demand for a good or service is greater than its supply, a shortage occurs, leading to upward pressure on the price. This increase in price acts as an incentive for producers to increase their supply, as they can now sell the goods or services at a higher price and make more profit.
Conversely, when the supply of a good or service is greater than its demand, a surplus occurs, leading to downward pressure on the price. This decrease in price acts as an incentive for buyers to increase their demand, as they can now purchase the goods or services at a lower price.
The equilibrium price and quantity are reached when the quantity demanded matches the quantity supplied, resulting in a market clearing price. At this point, buyers and sellers have no further incentive to change their behavior, leading to a stable market outcome.
By analyzing the factors that influence supply and demand, economists can predict market prices and the resulting incentives for buyers and sellers. This understanding allows for more accurate economic decision-making and helps to explain fluctuations in prices and quantities in various markets.