Basic Economic Problems Essay

Even though the resources to produce both are limited, there is much more labor and capital available to produce chicken meat than shark meat.Not to mention the quantity of sharks is also much more limited than that of chickens.

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A good is considered scarce if it has a non-zero cost to consume. Almost every good we consume as individuals, or as a society, costs something and is scarce. Therefore, scarcity creates a need for decisions and trade-offs to be made.

Why are some scarce goods more expensive than other scarce goods? One good may be more scarce than another, either because of limited resources or higher want (demand) for that good.

We run into scarcity because while resources are limited, we are a society with unlimited wants. Economics is the study of production, distribution, and consumption of goods and services.

If society did not have to make choices about what to produce, distribute, and consume, the study of those actions would be relatively boring.

As you increase production of gadgets, you have to decrease production of widgets, and vice versa. Assume the unlimited demand of gadgets was 100 and widgets was 300. All points along and inside the PPF are attainable.

Basic Economic Problems Essay

If labor was not scarce, society would produce 100 gadgets and 300 widgets. Because society cannot meet the unlimited demand given the limited amount of labor, gadgets and widgets are considered scarce.

Let's take two scarce goods - shark meat and chicken.

Both have a non-zero cost/price, but we would all agree shark meat is much more expensive to buy than chicken. The resources to produce shark meat are largely limited by the labor and capital it takes to catch a shark, while the labor and capital required to produce chickens is less limiting.

In a socialist economy the basic economic problems are solved through plan­ning.

The government appoints a Central -Planning Authority which makes economic decisions.

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