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Module Economic Problems

The document discusses the economic concepts of scarcity and unlimited needs, and identifies the three main economic problems as what to produce, how to produce, and for whom to produce. It explains that scarcity means demand exceeds supply, and this limits choices for consumers. The three economic problems deal with how a society allocates its scarce resources to maximize satisfaction of human wants through production, distribution, and use of goods and services.

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hjpa2023-7388-23616
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11 views

Module Economic Problems

The document discusses the economic concepts of scarcity and unlimited needs, and identifies the three main economic problems as what to produce, how to produce, and for whom to produce. It explains that scarcity means demand exceeds supply, and this limits choices for consumers. The three economic problems deal with how a society allocates its scarce resources to maximize satisfaction of human wants through production, distribution, and use of goods and services.

Uploaded by

hjpa2023-7388-23616
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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College of Business, Economics and Management

Bicol University Daraga Campus


Daraga Albay

MANAGERIAL ECONOMICS
Module _ : Economic Problems

==================================================================

Objectives:
1. Discuss the concepts of Scarcity and Unlimited Needs
2. Identify the three economic problems
3. Describe how each of the economic problems are addressed

Contents:
1. Scarcity and Unlimited Needs
2. Economics Problems: What, How and Form Whom

Discussion:
Scarcity and Unlimited Needs
Scarcity is one of the key concepts of economics. It means that the demand for a good
or service is greater than the availability of the good or service. Therefore, scarcity can
limit the choices available to the consumers who ultimately make up
the economy. Scarcity is important for understanding how goods and services are valued.
Things that are scarce, like gold, diamonds, or certain kinds of knowledge, are more
valuable for being scarce because sellers of these goods and services can set higher
prices.

Scarcity of goods and services is an important variable for economic models because it
can affect the decisions made by consumers. For some people, the scarcity of a good or
service means they cannot afford it. The economy of any place is made up of these
choices by individuals and companies about what they can produce and afford.

The goods and services of any country are limited, which can lead to scarcity. Countries
have different resources available to produce goods and services. These resources can
be workers, government and private company investment, or raw materials (like trees or
coal). Certain limits of scarcity can be balanced by taking resources from one area and
using them somewhere else. Sellers like private companies or governments decide how
the available resources are spread out. This is done by trying to strike a balance between
what consumers need or want, what the government needs, and what will be an efficient
use of resources to maximize profits. Countries also import resources from other
countries, and export resources from their own.
WHAT, HOW AND FOR WHOM TO PRODUCE?
What to Produce, How to Produce and For Whom to Produce
Every society faces the scarcity of resources due
to their limited availability, this leads to the
allocation of scarce resources in a way to attain
maximum satisfaction of human wants.
Allocation of resources raises the basic problem
of the Economy which deals with the production,
distribution and disposition of goods and
services which are also known as the Central
Problem of the Economy. These can be
studied by knowing:

There are different needs of every human in the society,


considering that it is decided which goods and services are to
be produced and in what quantity are they required in the
society. As the resources are scarce, the production of one
means sacrificing another. Production has to be done in a way
that maximum satisfaction is achieved by society by looking
into what is more important than another.
In deciding what to produce it is wise to consider the most
need of the individual or what is essential to the society and the resources available.

This refers to different aspects of production from selecting


which raw materials to be used, what technique of
production has to be adopted, and where these goods would
be produced. How means deciding the manner in which the
goods are produced largely deals with deciding what amount
of labor would be involved. There is a capital-intensive
technique where more machinery is used and then there is
labor intensive technique where more manpower is used
This involves deciding who is the end consumer of the
goods or services that are produced. Every good
produced is made for a specific section of society as
every product cannot satisfy all the sections of society
due to difference in the paying capacity of the
consumer. Inequality in the distribution of income can
be noticed in society because of which there is a
difference in the paying capacity of the consumer.

For example, the production of graded rice is for people with higher paying capacity and
the production of non-graded rice is for lower-income people. Luxury goods and services
are for people with high income.

To do Activity:
Relate the three economic problems in your personal experience.

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