Question.3035 - 1. What is the difference between scarcity and rarity? 2. Do Bill Gates and Donald Trump face scarcity and if yes, how so? 3. Specifically, what are your opportunity costs of going to college? 4. If all the unemployment in the economy were eliminated, how would this be shown on a production possibilities curve diagram? 5. What would cause the nation's production possibilities curve to shift inward and outward--be sure to give examples.
Answer Below:
1. What is the difference between scarcity and rarity? 2. Do Bill Gates and Donald Trump face scarcity and if yes, how so? 3. Specifically, what are your opportunity costs of going to college? 4. If all the unemployment in the economy were eliminated, how would this be shown on a production possibilities curve diagram? 5. What would cause the nation's production possibilities curve to shift inward and outward-- be sure to give examples. Brief response 1. Scarcity is one of the basic economic problem and a persistent condition of human nature that exists because society has unlimited wants and needs, but limited resources used for their satisfaction. Scarcity is a state of something being in short supply. The productive resources are scarce to fulfil the boundless human needs. Scarcity in Economics does not mean a shortage. It simply means something which is not substantially available for free all the time. It means that supply is finite, it does have restrictions, people have to select the best alternative and sacrifice the other choices in order to obtain that item. Rarity simple means something rare, unusual, or uncommon. Rare is not a commonly used economic term the way scarce is. Rareness is a subjective decision call. Things that is hard to find, and hard to obtain is called "rare". Rarity has to do with the uniqueness of the item. 2. Scarcity can be concisely explained by the examination that there are limited resources and unlimited desires. Even Bill Gates faces tradeoffs; he cannot exactly do whatever he wants. Whether he should takes his wife out for a vacation or if he has to give an expensive gift to his wife he has to cut his options (ever so slightly) and has reduced his ability to buy other things in the future. We can portray such type of situation by saying, “Bill Gates needs to scrimp and save on his resources, because they are finite.” Even Donald Trump must take the best decision from the available alternatives In order to make the most of his well-being, should he go on vacation or should he work, should he buy or sell some hotels, should he increase the tariffs for accommodation in his hotels during peak season or reduce them during off season. These are all instances of economic choice brought about by scarcity. 3. The opportunity cost refers to the cost forgone in favour of production of another product. The cost of an option that must be forgone in order to follow a certain action. In another words the benefits that could be received by taking an alternative action. The opportunity cost of going to college is earning money by working instead of attending college. Either take a loss of four years of wages while getting your degree; or you hope to earn more during your career, to offset the lost wages through your education. A choice between two options must be made. It would be an trouble-free decision if you knew the end outcome. However, the risk that could achieve greater benefits with another option is the opportunity cost. 4. The production possibilities curve assumes all resources are fully used. If there is unemployment, you are not operating on the curve but inside it. The curve itself does not change when labour or other resources go unutilized or wasted.If the assumption of full employment of resources is eliminated, the opportunity cost of increasing food production becomes zero. If unemployed resources exist, the production of one good can be increased without decreasing the production of the other good. In fact, the production of both goods could be increased if unemployment is eliminated. 5. The production possibilities curve shifts are caused by: • Change in technology • Changes in resources • Imparting Education or training to the workforce • Changes in the labor force Change in technology The most common reason a production possibilities curve (PPF) would shift is because of a change in technology, or because of economic growth For example, if someone developed a faster computer system, PPF would shift to the right or outward . This means that everything else held constant more goods can be produced after the technological change.An outward shift would result when there is an improvement in technology that would benefit both types of goods. A major war causes destruction of capital equipment in the country. This would cause output to decrease, so in this case, the production possibilities curve shifts inward, Changes in Resources If a country discovers new alternative energy source which in turn would increase output and the PPF curve would shift to the right.An inward shift would result when there is unemployed resources or when the economy uses resources inefficiently .If the country gets devastated by a major hurricane, this would make it more difficult to produce things. This causes output to decrease, which in turn shifts the production possibilities curve inward, or to the left. Change in Education and Training Training and education is imparted to the workforce, they are then referred as human capital. Education and training increase knowledge, and knowledge tends to increase productivity, so this would shift the production possibilities curve to the right. Change in Labor Force Increase in the labor force, either boom in population or from immigration, and then the production possibilities curve shifts outward, or to the right. It's because more people working means more production . If the country experiences more unemployment, then the unemployment rate goes up. That means decreasing labor force, and people are not productive. This would decrease the national output and shift the production possibilities curve inward, or to the left.More Articles From Economics
.ico)
.ico)
.ico)
.ico)
