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Economics is fundamentally rooted in the concept of scarcity, which highlights the imbalance between limited resources and unlimited human desires, necessitating decisions on resource allocation. Applied economics is crucial for addressing real-life economic issues by providing practical solutions and guiding policymakers in areas such as unemployment, inflation, and resource management. Ultimately, applied economics translates theories into actionable strategies to improve decision-making and enhance the welfare of society.

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11 views

lessons.pdf

Economics is fundamentally rooted in the concept of scarcity, which highlights the imbalance between limited resources and unlimited human desires, necessitating decisions on resource allocation. Applied economics is crucial for addressing real-life economic issues by providing practical solutions and guiding policymakers in areas such as unemployment, inflation, and resource management. Ultimately, applied economics translates theories into actionable strategies to improve decision-making and enhance the welfare of society.

Uploaded by

ladyfaith2323
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Estalilla, Faith B.

12 ABM 4

1. Why is economics deeply rooted in the concept of scarcity?


– Since scarcity serves as the basis for all economic activity and decision-making, the concept of
scarcity is fundamental to economics. The basic issue of scarce resources in comparison to
limitless human desires is known as scarcity. It draws attention to the reality that although people
have limitless needs for goods and services, there are only so many resources like land, labor,
and capital—that can meet those needs. This mismatch between wants and resources compels
individuals, corporations, and governments to make decisions about how to allocate resources
more efficiently. For example, as demand for a good rises, the price rises due to limited
availability. Higher prices encourage customers to spend less, lowering demand, while
manufacturers may boost supply if possible. As time goes on, supply and demand balance out to
create an ideal distribution of resources.

Additionally, scarcity presents the idea of opportunity cost, which is the worth of the next best
option that is given up while making a decision. Economics assists in analyzing the trade-offs
involved in every decision in order to identify the most advantageous course of action.

Moreover, scarcity affects how economies prioritize production and consumption. Since resources
cannot fulfill all human desires, societies must decide what to produce, how to produce it, and for
whom to produce. These choices form the basis of economic systems and policies. In essence,
economics exists because scarcity exists. Without scarcity, there would be no need to study how
people make decisions, allocate resources, or respond to supply and demand.

2. In what way is applied economics important in tackling the economic issues/problems of the
country?
– Applied economics is important in solving a country’s economic problems because it uses
economic theories to address real-life issues. It helps policymakers, businesses, and individuals
make better decisions by providing practical solutions to challenges such as poverty,
unemployment, inflation, and resource allocation.

For example, if a country is facing unemployment, applied economics can analyze the reasons
behind it and suggest solutions, like creating more job opportunities through government
programs or encouraging businesses to invest. Similarly, if inflation is high, applied economics
can guide policymakers on adjusting interest rates or managing the money supply to control rising
prices. Applied economics also plays a crucial role in resource management. Since resources like
land, money, and energy are limited, applied economics helps governments decide how to use
these resources effectively. For instance, it can help determine whether a country should invest
more in education, healthcare, or infrastructure to achieve long-term growth.

Moreover, applied economics studies the impact of policies on people’s lives. It helps identify
what works and what doesn’t, ensuring that governments create policies that benefit the majority.
For example, by studying the effects of taxes or subsidies, applied economics can ensure that
policies are fair and promote economic stability.
In short, applied economics turns economic theories into practical solutions. It helps address real-
world problems, improves decision-making, and ensures that a country’s resources are used in
the best possible way to improve the lives of its people.

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