https://www.cliffsnotes.

com/study-guides/economics/ Example of scarcity

introduction/macroeconomics - Water scarcity – Global warming and changing
weather has caused some parts of the world to
What are the branches of economics? become drier and rivers to dry up. This has led to
Macroeconomics a shortage of drinking water for both humans and
- Economic behavior of the whole economy. It animals.
deals with various issues like national income, - Labour shortage – during covid 19 pandemic, we
inflation, distribution, employment, general price experienced this or we’re still experiencing this
level, money, and overall economic growth. because covid cases are still on the rise. A lot of
Microeconomics establishments have closed due to lack of
- Economic behavior of individual units and how customers, so a lot of people lose their jobs. Even
that behavior is influenced by government. It in airlines diba po nagbawas sila ng flight
deals with various issues like demand, supply, attendants.
factor pricing, product pricing, economic welfare, How does society allocate its scarce resources?
production, consumption, and more. - through the influence of prices on production and
consumption decisions. Changes in supply or
What is economics? demand cause relative prices to change; in turn,
- It is the study of how people can use their limited buyers and sellers adjust their purchase and sales
resources in society to satisfy their unlimited decisions.
want. What is the relationship between economics and
- A branch of knowledge that deals with the scarcity?
production, distribution, and consumption of - Economics is an academic attempt to put the
goods and services. world’s limited resources to their best use.
What is scarcity? Production possibilities
- The gap between limited resources and - It refers to different combinations of goods and
theoretically limitless wants of an individual. services which an economy can produce from a
Cause of scarcity? given number of resources and a given stock of
- Poor distribution of resources, personal technology.
perspective on resources, a rapid increase in Production Possibilities Curve (PPC)
demand, and a rapid decrease in supply. - It is a model used to show the tradeoffs
- Poor distribution of resources - the resources are associated with allocating resources between the
available to meet the needs of a certain production of two goods. The PPC can be used to
population, but the problem is that they have no illustrate the concepts of scarcity, opportunity
way of getting to the people. cost, unemployment, economic growth, and
- Personal perspective on resources - there may distribution.
not be any shortage of goods and services at all. Opportunity cost
Rather, the problem may be that someone simply - It is the value of the next-highest-valued
thinks there is a shortage alternative use of that resource. For example, A
- Increase in demand and decrease in supply – just student spends three hours and 150 pesos at the
like what happened during the first month of movies the night before an exam. The
lockdown. Nag increase ang demand sa opportunity cost is time spent studying and that
facemask, face shield, and alcohol while yung money to spend on something else.
supply po sa mga yon is mababa or hindi sapat Unemployment
para sa lahat ng individual. - If there is unemployment, resources will not be
Effects of scarcity? utilized to their potential.
- It makes people place a higher value on an object
that is scarce and a lower value on one that is
readily available.
 - When production is below its potential due to Supply
unemployment, it would mean that the economy - It is the total amount of a given product or
concerned is operating inside the PPC curve. service a supplier offers to consumers at a given
There will be no shift in the PPC since resources period and a given price level.
and technology are the same. Law of supply
Economic growth - It is microeconomic law that states that, all other
- When the PPF shifts outwards, it implies growth factors being equal, as the price of a good or
in an economy. When it shifts inwards, it service increases, the quantity of goods or
indicates that the economy is shrinking due to a services that suppliers offer will increase, and vice
failure in its allocation of resources and optimal versa.
production capability. A shrinking economy could price Quantity of goods
be a result of a decrease in supplies or a increase increase
deficiency in technology. decrease decrease
Economic distribution Supply curve
- It is the way total output, income, or wealth is - It is a graphic representation of the correlation
distributed among individuals or among the between the cost of a good or service and the
factors of production (such as labor, land, and quantity supplied for a given period. In a typical
capital). illustration, the price will appear on the left
Production Possibilities Frontier (PPF) vertical axis, while the quantity supplied will
- It is a graph that shows all the different appear on the horizontal axis.
combinations of output of two goods that can be Supply and demand
produced using available resources and - Supply and Demand Determine the Price of
technology. The PPF captures the concepts of Goods and Quantities Produced and Consumed.
scarcity, choice, and tradeoffs. When supply exceeds demand for a good or
Demand service, prices fall. When demand exceeds
- It is the number of consumers who are willing supply, prices tend to rise. There is an inverse
and able to buy products at various prices during relationship between the supply and prices of
a given period. goods and services when demand is unchanged.
Law of demand Equilibrium price
- It states that there is an inverse relationship - The price at which the quantity demanded is
between the price of the good and the quantity equal to the quantity supplied is called the
demanded. equilibrium price Changes in the equilibrium
Price Quantity Demanded price occur when either demand or supply, or
increase decrease both, shift or move.
decrease increase Market equilibrium
Demand curve - It is the resulting balance between supply and
- It is a graphic representation of the relationship demand. When the supply and demand curves
between product price and the quantity of the intersect, the market is in equilibrium. This is
product demanded. where the quantity demanded, and quantity
Factors that cause change in demand supplied are equal.
- income, trends and tastes, prices of related Equilibrium
goods, expectations as well as the size and - A state of balance when demand is equal to
composition of the population. supply.
Market place 2. Spillovers – It is frequently used to describe a
- It refers to the whole area of operation of negative impact brought on by an independent
demand and supply. It enables the exchange or event occurring from a seemingly unrelated
transaction of goods and services by bringing event that is experienced in one area or around
buyers and sellers together. the world. Example: An example of a negative
Equity externality is pollution that results from the
- It is an important concept where economists are production of a good in a factory. Individuals
unable to determine if a specific distribution is living around the factory are exposed to the
fair. pollution and may cause them health issues. An
Efficiency example of a positive externality may include
- It is when waste is reduced and all items and workplace CPR or First Aid training. This could
factors of production in an economy are save lives outside of the workplace without
distributed to their most valuable uses. requiring potential beneficiaries to pay for the
What is the difference between equity and efficiency? training.
- Efficiency refers to how the resources in an 3. Inequity -
economy are utilized (nagamit). On the other 4. Market power - Companies and organizations
hand, equity refers to how equally the resources have an incentive to create goods and services
in an economy are distributed (ipinamahagi). that consumers value at low prices in markets
Equity-efficiency tradeoff with high levels of competition. The company or
- It is when maximizing the efficiency of an organization will lose money or go out of
economy leads to a reduction in its equity—as in business if they don't satisfy customer demand or
how fair or equal its wealth or income is maintain prices low because customers may
distributed. easily find replacements elsewhere. Example:
How can a market be efficient but not equitable? Agricultural crops like corn serve as examples of
- The equity-efficiency tradeoff occurs when markets with intense competition. Similar crops
maximizing the market's productive efficiency are grown by plenty of farmers. Because
results in less equitable outcomes. A market that consumers can easily acquire corn that is better
is unfair can lead to unequal access to wealth, or cheaper elsewhere, farmers that grow corn
income, basic minimum wage, and other that tastes bad or charge too much for it are
products and services. likely to lose customers.
Market failure
- It is when the distribution of products and
services in the free market is inefficient.
1. Public goods and services - If a group of people
that uses the goods fails to pay but continues to
use them as actual payers, this might lead to
market failures. This means that it is not possible
to prevent anyone from enjoying a good, once it
has been provided. Therefore, there is no
incentive for people to pay for the goods because
they can consume it without paying for it.
Example: …
Monopoly 2. Utility theory – the satisfaction of people's
- The only producer of a good or service, and interests as well as their desire for happiness.
market power is concentrated in the hands of a This idea claims that individuals will only spend
single producer. Example: Microsoft, Google, and what they can afford in order to be happy, and
Meralco. that continued happiness and purchases will
Oligopoly result in discontent.
- When a market with many buyers has limited - It refers to the degree of pleasure or satisfaction
competition and market power is concentrated in that an individual receives from an economic act.
the hands of only a few producers. Example: 3. Production theory – companies or enterprises
PLDT, Coca-cola, and Mcdonalds. whose primary goal is to produce goods and
5. Instability services with the lowest possible production
costs or with the lowest possible raw material
INTRODUCTION TO ECONOMIC DEVELOPMENT costs in order to sell such goods and services at
What is development economics? the lowest possible prices.
- It is a branch of economics which deals with the 4. Price theory – it’s the combination of utility and
other elements of the economy: fiscal, economic, production wherein the production is the supply,
and social conditions of developing countries. and the utility is the demand.
- Areas that development economics focuses on - The price is based on the production and the
include health, education, working and market utility is behaving in the market.
conditions. Economics
Fiscal - It examines how people use their scarce
- It refers to the money of the country. resources to satisfy their unlimited wants.
Economics What is scarcity?
- It includes the debt, gross domestic product, - The gap between limited resources and
gross national product, and. the products that we theoretically limitless wants of an individual.
are exporting and importing What to produce
Gross domestic product - We must know the needs and wants of an
- It measures the monetary value of the final goods individual for them to survive.
and services purchased by the consumer and Goods
produced in a country during a specific time - These are the things you can see, feel, and touch.
period. - These require a scarce resource to produce, and
Gross national product it satisfies human wants.
- It measures the total value of all finished goods Service
and services generated by all citizens of a country - An intangible input yet it used scarce resources to
within a specific financial year, regardless of satisfy human wants.
where they were located. - The skills and knowledge of an individual is
Social condition limited.
- Part of it is developing its key factors such as Distribution
health, education, working and market - Equal allocation of the total output as well as the
conditions. income and wealth among its citizens.
Resources
Basic concepts of microeconomics - Raw materials to produce goods and services that
1. Incentives and behaviors - reactions of firms or the people want. The goods and services are
businesses when they are confronted with a scarce because the raw materials themselves are
situation of an economic change. scarce.
Labor Do households and firms have direct relationships?
- Human effort whether physical or mental. Labor - Yes, they are heavily dependent on one another.
is scarce because the time that we’re using to Without household, firms will not exist and
fulfill the goods and services is scarce without firms we’ve got nothing to consume.
Capital Efficiency
- Human creation to produce goods and services. - It is concerned with the optimal production and
Physical capital allocation of resources given existing factors of
- The things that are helping production push
production.
through for example machinery, buildings, and
6 types of efficiency
automotives.
Human capital 1. Productive – we are pertaining to firms or
- It consists of the skills and knowledge that people businesses that are producing the goods and
require to increase their productivity. services. For them to produce their product in a
Natural resources matter that the cost in creating that is as low as
- Anything that is a gift from nature. possible. Product centered.
Renewable resources 2. Allocative – creating goods and services based
- These are the things that we don’t know how only on the demand that the market or
long they’re going to last. Example: Oil, coal, consumers are giving us. Distributing resources
natural gas, metals, stone and sand are natural according to consumer preference. We’re only
resources. Other natural resources are air, producing what is needed in the economy.
sunlight, soil and water. Animals, birds, fish and Consumer centered. Formula: P = MC
plants are natural resources as well.
3. Dynamic – efficiency over time. New technology
Exhaustible natural resources
or processes that make the work easier overtime.
- The resources which are in limited quantity in
nature can be exhausted by human activities. 4. x-efficiency – incentives to cut costs.
Entrepreneurial ability 4 causes of inefficiency
- the unique ability required by humans to - Monopoly power
innovate and consider different alternate - State control
resources in order to produce such goods and - Principal-agent problem
services. It’s all about innovation. - Lack of motivation
Market 5. Efficiency of scale – taking advantage of
- A place where buyers and sellers carry out economies of scale.
exchange at mutually agreeable terms. 6. Social efficiency – considering external
costs/benefits.
Four types of decision markets
Equity
1. Household
- How resources are distributed to society
2. Firms
1. Vertical equity
3. Governments
4. The rest of the world - Concerned with how resources are distributed to
society wherein when you have a higher income,
2 versions in household your taxes to be paid is getting high as well. This
- As a consumer can be done through proportional and
- As an employee progressive taxation.
- High income earners pay more tax while low-
income earners pay less income tax
Proportional taxation
- You are grouped according to your salary group,
no matter how high or low if you’re part of the
group you’ll be getting the same percentage of
tax rate.
Progressive taxation
- The higher your sales, the higher your tax will be.
2. Horizontal equity
- Treating everyone in the same situation is the
same. People in the same income group will pay
the same levels of tax.

Market failure
- An economic situation that occurs when there is
an efficient distribution of goods and services in
the free market.
Market failure happens when firms/companies produce
too many or too little supply versus to that of the actual
demand.

Negative externalities
Positive externalities