Economics Notes

****The Economic Problem

What Do These Notes Cover?
To have a look at the mind map for this resource, please follow this link. If you would like to listen to these notes as an audio recording, please follow this link [2MB]. Mind Maps have been produced to introduce topics and give students an overview of key topics being studied. The maps can be viewed as a whole page or, for those who prefer a more linear approach, as a text version.

Scarce Resources: o Land Rent o Labour Wages o Capital Interest o Enterprise Profit o Uneven Distribution The Science of Choice (linked to Scarce Resources) o Value o Utility o Sacrifice Opportunity Cost

How do we sum up the basic economic problem? We all suffer from it and spend most of our lives trying to resolve it. Essentially, the economic problem stems from the fact that as humans, we have unlimited wants and needs. A need is something that can be seen as being essential to survival, such as food, water, shelter and warmth. A want is something that we would like to have but which is not essential to survival - a car, the latest version of the PlayStation, that new top you have seen in Top Shop, the mobile phone with all the latest gadgets on etc. The problem is that the world and every individual in it have limited resources in relation to the wants and needs we have. We never have enough money to get what we 'want'. There are never enough resources to make sure the health service works properly; teachers and lecturers will always moan about how they never have enough resources to do their job properly. In recent times, we have heard much about the problems faced by the armed forces in conflict zones around the world 'not having the tools to get the job done'.

There have been plenty of news items in recent years about the lack of resources available to the military in dangerous conflict zones such as Iraq and Afghanistan. If we were to increase the number of soldiers, equipment and weapons available to the military, it would have consequences elsewhere. The government has limited funds from taxes, which have to be spent on a wide range of things - if we diverted more funds to the military, there would have to be cuts elsewhere in the government's spending programme - or a rise in taxes. Copyright: Dragon MasterGunner, from stock.xchng. All these things are symptomatic of the tension between scarce resources and unlimited wants and needs. That is what the economic problem is all about. At this stage, you might point to the fact that countries like the UK and the United States produce massive amounts of waste every year. You might look at the food that is wasted in restaurants, fast food outlets and even the school canteen every day to wonder why there is so much wasted food, with so many people in the world hungry and on the verge of starvation. Part of the problem is the fact that resources are not distributed evenly between countries and societies. The terms 'wants' and 'needs' are also relative terms. 'I really, really want a Ferrari' might be the comment of an individual in the UK; 'I really, really want to be able to walk only two miles to get the daily ration of water for my household'

might be the cry of an individual in the Sudan. To each individual, they are both important - we might be able to point out that the Ferrari is not really that necessary; a Smart car will do just as well!

Wants, needs and scarce resources - all part of the economic problem. Wants and needs are relative - my burning want might be very different from the wants of someone like the boy in the image above. Copyright: Luca Biagiotti from stock.xchng, Andrew Ashwin, and Luc Sesselle from stock.xchng. Resources is a specific term used a great deal in economics. It describes all the things available at our disposal that can be used to satisfy our needs. This therefore includes things like our income, which is simply a means of acquiring a range of goods and services. Resources therefore might be the food we buy at shops, clothing, houses, cars, entertainment, metal, minerals, oil, timber, gas, plastics and so on. In economics, these resources are normally classified into three or four categories. These are:

Land - all the natural resources of the earth. That includes the fish in the sea, all the minerals found in the earth, metals, sand, stones, rocks, timber, food from the soil and so on. Economists have a name for the reward for the income from 'land' which is rent. Labour - all the human mental and physical effort that goes into production. This will include people who work as street cleaners, people who are interior designers, teachers, the police, doctors, bricklayers, architects and so on. The reward for labour is referred to as wages. Capital - all the equipment, machinery and buildings that is not used for its own sake but for the contribution it makes to production. This includes things like office desks and chairs, computers, lorries, cranes, specialist machinery in a factory, the humble office coffee machine and so on. The 'price' of acquiring capital is referred to as interest.

This factory uses a large amount of capital in the production process - there are the buildings that form the factory, all the machines that are used in production and all the equipment needed to make sure the machines and the production process operates smoothly. However, what it also needs is labour, raw materials, land and enterprise to make it all work properly. Copyright: Wena, from stock.xchng.

Enterprise - the skills needed to organise other resources into some form of production. Some people would put enterprise as a specialist skill within labour but enterprise does have some distinctive characteristics that merit its own category. The return for enterprise is called profit.

Regardless of the task, the human resource of labour comes in many different forms. Labour offers its services in exchange for a reward or price - wages. Copyright: Cristina Ortigoso, Mitchell Powell, Joseph Zlomek and Francesco Pacilli, all from stock.xchng.

If we had an unlimited supply of resources at our disposal we would be able to meet any want or need. The problem is, we do not have unlimited resources at our disposal. We therefore have to make choices. Economics, could, therefore, be described as the science of choice. Choices are made at many different levels.

You might go into a shop and see two great-looking pairs of jeans but you only have enough money (resources) to buy one of them. A hospital manager may have 50 patients all wanting to have an operation immediately but there might only be sufficient resources (doctors, nurses, equipment, rooms, beds etc.) at that time to treat 20 of them. A business might have received a major order for its products and wants to increase production but does not have the staff or the equipment and raw materials to meet the order in full. An individual in Ethiopia might want a bowl of rice to eat but has to survive on whatever they can scavenge from the parched earth.

All these examples highlight the problem of scarce resources in relation to wants and needs. When we are faced with these choices, we have to go through some quite sophisticated decision making. We might not always be aware that we are making sophisticated decisions but in reality we are. Such decision making is at the heart of the subject of economics and tells us something about how humans try to tackle the economic problem.

****Find Answers for: What Are The Basic Problems In Economics?

1 Well we are in recession for a start. We are in dept up to our necks. we need alternative energy sources so we can get away from the highly overused oil. We need to sever our dependency on forghien oil. Prices are way to high. The stock market is terribly low. And our government kept secretes from us. Have you seen that guy who was trying to sell barack"s vacant senate seat? Gov. Is to busy doing underhanded things like that instead of fixing problems at hand. well I hope this helps ^_^ Great Answer Not Helpful Report Watsonkid2 2 years ago Ads by Google

International Economicswww.economics.bham.ac.uk/ MSc in International Economics at the University of Birmingham

0 The term economics came from two Greek words 'oikos' and 'nemesis'. 'Oikos' means 'household' and 'nemesis' means 'management'. So, economics deals with the subject matter of household management. Economics is always considered as a social science where general people are really concerned with the problem of choice as the supply of most of the necessary, comfortable and luxury items are scarce in nature. Modern economists are more concerned about four basic problems of economics. These are: (a) what to produce (b) how to produce (c) how much to produce and (d) for whom to produce. All these problems are associated with the 'problem of choice'.

In a free market economy the basic problems are solved through price mechanism but in a socialist economy these problems are solved through government planning. Though this economic planning is very expensive to chalk out and execute, the socialists think that government should incur this expenditure for the sake of the general mass. Again in a mixed economic system both planning and market mechanism operates to reach at the solution. Here planning is made for public sector enterprises whereas market mechanisms are in force in private sector. Great Answer Not Helpful Report Sudipa_sarkar 4 years ago Ads by Google

Senior management soughttjen-penge.org/bd/ World topleader seek cooperation Proven concept - soon in Bangladesh

0 Economics is a study concerning about how humans allocate their resources for their own use. Basically, the problem is that the resources we have are LIMITED whereas humans' needs and wants are potentially UNLIMITED. This leads to another problem... how are we going to allocate the limited resources we have to satisfy most of our wants? Great Answer Not Helpful Report Xenoslash 3 years ago

0 We can used how limited resource to satisfy our wants if we are have limited population and there is large number of working class people like 18 year to 50 year which are still working class and government are ready to establish company and sale there product in cheaper rate to people this can satisfy our wants. Great Answer Not Helpful Report Topsco 3 years ago

0 Diffine economics Great Answer Not Helpful Report

Guest 1 year ago Ads by Google

Data Analysis & SPSS Helpwww.EasyStats.tk Data analysis, Research service Tuition, Free consultation, 15 p/H

0 Shortage ... Corruption.. Great Answer Not Helpful Report Guest 4 months ago

0 Basic economic problem? Great Answer Not Helpful Report Guest 4 months ago

0 Scarcity and shortage.. Great Answer Not Helpful Report Guest 4 months ago

0 THE BASIC PROBLEM OF ECONOMICS IS THE "SCARCITY OF RESOURCES" . Human wants are unlimited but to fulfill those wants,resources are limited. This resource gap creats problem. If wants are kept in control the problems economics may not arise. Great Answer Not Helpful Report

Guest 4 months ago

0 The basic economic problem are foreign politics Great Answer Not Helpful Report Guest 9 months ago Ads by Google

USA and World Newswww.tipnews.info To whom quick information is fundamental

0 The basic problem in economics is scarcity and choice. Great Answer Not Helpful Report Hns 8 months ago

0 Scarcity of resources and also unlimited needs or wants Great Answer Not Helpful Report Great Answer Not Helpful Report solution is to make a choice

Related searches Related reading

What Are The Basic Problems Of Economics? Economics doesn't account to the some of the issues clearly i.e. In some cases it is difficult...

What Is Basic Economics Problem? The basic problem of economics is people have limited and less resources but they have unlimited... What Are The Basic Tools In Economics? Economics provide basic know how of demand and supply analysis, market equilibrium , types... What Are The Four Basic Economics Problem? Money, food, shelter, and wisdom What Are The Basic Tools Of Micro Economics? The basic tools of the micro economics are demand and supply. According to demand function,...

Popular questions
What Is The Difference Between Microeconomics And Macroeconomics? MIcroeconomics is about studying/analyzing the economics of individual economies/entities... What Is A Cobweb? Cobweb is the Middle English term for a spider web. In etymology, it is derived from... What Are Five Reasons For High Unemployment Rate In Developing Countri... The reasons are inter-related.#1: Corrupt and/or inefficient government officials... Write Down The Difference Between Zakat And Tax. Difference between Zakat and a tax 1. A tax is levied on all the citizens of the... Can You Explain The Ordinal Approach To Consumer Equilibrium? This theory of consumer behavior is know by a Varity of its names, as it is called...