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Scarcity

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5 views

Scarcity

Uploaded by

serahjames225
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Scarcity: The condition that exists when there are not enough resources to satisfy all

the wants of individuals or society is referred to as scarcity. Scarcity is central to the


study of economics. Without scarcity there will be no economics. The major task of
economics is to study and evaluate alternatives. Economics is a decision science that
is concerned with the choices we make and the consequences of our choices for
ourselves and others. That is why it has been defined differently by different scholars.
Society/government:
Every society has some groups of policy makers who are charged with making
decisions about the economy's scarce resources. Generally, these people are
expected to allocate resources in ways that benefit society as a whole. This cannot be
realized without making choices that are fundamentally economic in nature. Choices
that entails such issues as:

a. Whether to raise taxes to finance the production of public works such as roads,
dams, or to lower taxes and increase incentives for the production of private goods
such as cars and television sets.
b. Whether to use resources to finance white elephant project like: stadium, arms,
construction of airports or building low cost houses.
c. Whether to attempt to reduce unemployment or inflation or both.

Individual/business organization
Your knowledge of economics can be useful in helping you in understanding the
courses of many situations you encounter personally.
 It can help you to determine the reasons of event that occur nationally.
 It can also help you to understand or determine how a consumer spends his/her
income so as to achieve the greatest satisfaction or happiness.
 It tells you how a business firm determines which combination of resource will
allow the production of a quantity of output at the lowest possible cost.
 How does firm determines what price to charge for a product what quantity to
produce so that it will obtain the greatest amount of profit.
 It may also help you to increase your chances of acquiring material success.
 It seeks to describe the world and explains why it functions the way it does.
MICROECONOMICS THEORY
Microeconomics is concerned with specific segments of the economy, particularly
the behaviour of individual, consumers and firms, and of groups of firms in industries.
As a branch of economics, it examines how resources are organised, controlled and
rewarded in various economic activities, as well as how relative prices of goods and
services are determined. The main topics falling within microeconomics include the
theory of price and wage determination, the theory of consumer behaviour, the theory
of production and welfare.

Differentiation between Macroeconomics and Microeconomics


Microeconomics studies economic units such as household, firm and government.
Any economics study that has to do with sub-aggregate and independent units in an
economy is termed microeconomics. Therefore any economics study that is related to
how market operates, organisation of firms into industries, public finance by sector
and general behaviour of household consumers and producers are embedded in
microeconomics studies. On the other hand, the study of macroeconomics involved
the totality (aggregate) of the entire economy. Any study that is related to population,
national income, taxation, inflation, aggregate money supply and demand,
unemployment, international trade and policies that regulate the workability of the
entire economy is covered under macroeconomics.
Microeconomics focuses on the actions of individual agents within the economy, like
households, workers, and businesses; while Macroeconomics looks at the economy as
a whole. It focuses on broad issues such as growth of production, the number of
unemployed people, the inflationary increase in prices, government deficits and levels
of exports and imports among others. Microeconomics and macroeconomics are not
separate subjects, but rather complementary perspectives on the overall subject of the
economy.
Although, microeconomics pre-empts decision making, but all decision that are made
collectively by government are made under macroeconomics framework.
Both macroeconomics and microeconomics are important for economic analysis,
which are regarded as necessary apparatus of thought. They have both theoretical and
practical importance in the area of :
 Understanding the working of the whole economy. Ø
 Providing tools for economy policies.
 Efficient allocation and employment of resources. Ø
 Business decision
 Understanding the problems of taxation.
 International trade and balance of payment.
 Examining the condition of economic welfare. Ø
 Economic and social prediction.
 Construction and use of model for actual economic phenomena.
In a nutshell, if an economy is likened to an elephant, the study of the entire elephant
is macroeconomics study while, the study of the elephant leg, tusk, and tail are
microeconomics studies.
Microeconomics is the study of particular markets, and segments of the economy. It
looks at issues such as consumer behavior e.g. consumer choice theory, individual
labour markets e.g. demand for labour, wage determination, the theory of firms,
externalities arising from production and consumption, supply and demand in
individual markets.

Macroeconomics is the study of the whole economy. It looks at ‘aggregate’ variables,


such as aggregate demand, national output, inflation, unemployment, international
trade and globalization, economic growth, reasons for differences in living standards
and economic growth between countries, government borrowing and monetary / fiscal
policy (e.g. what effect does interest rates have on the whole economy) among others.

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