1.

Scarcity is the fundamental economic problem of having seemingly unlimited

human wants in a world of limited resources. It states that society has insufficient
productive resources to fulfill all human wants and needs. A common misconception on
scarcity is that an item has to be important for it to be scarce.

The additional satisfaction a consumer gains from consuming one more unit of a good or
service. Marginal utility is an important economic concept because economists use it to
determine how much of an item a consumer will buy. Positive marginal utility is when the
consumption of an additional item increases the total utility. Negative marginal utility is when
the consumption of an additional item decreases the total utility.

One of the widest known principles of economics is he equimarginal principle. The

principle states that an input should allocate so that value added by the last unit is
the same in all cases. This generalization is popularly called the eque-marginal. Let
us assume a case in which the firm has 100 unit of labor at its disposal. And the firm
is involved in five activities viz A,B,C,D and E then firm can increase any one of
these activity by employing more labor but only at the cost i.e,. Sacrifice of other
activities. An optimal solution is reached if he value of the marginal products is
greater in one activity than in other.

Both micro and macro economics make abundant use of the fundamental concept
of opportunity cost; in managerial economics the opportunity cost concept is useful
in decision involving a choice between different alternative courses of action. This
opportunity cost implies three things:1) the calculation of opportunity cost involves the measurements of sacrifices
2) sacrifices my be monetary or real
3) the opportunity cost is termed as the cost of sacrificed alternatives
In managerial decision making, the concept of opportunity cost occupies an
important place. The economic significance of as follows
1) It helps in determining relative prices of different goods.
2) It helps in determining normal remuneration to a factor of production
3) It helps in proper allocation of factor resources

This concept is an extension of the concept of time perspective. Since future is

unknown and incalculable, there lot of risk and uncertainly in the future. Everyone
knows that a rupee of today is worth mere than rupee will be tow years from now.
This appears similar to the saying that a bird in hand is more worth than two in the
bush suppose you are offered a choice of Rs. 1,000 to day is or Rs. 1,000 next year.
Naturally you will select Rs. 1,000 today. That is true because future is uncertainty.
The formula of computing the present value is given below.
V= A/1+i
Where
V = present value
A = amount interested Rs. 100
i = rate of interest 5 percent
v = 100/1 + 0.5 = 100/1.05 = 95.24