Basic economic ideas

Businesses in the market economy will only employ those factors of production which will be profitable and thus we may find a lot of unemployment as more machines and less labour will be used to cut cost. Even if you quit school, you need a place to sleep and food to eat.

Opportunity Cost The relevant cost of any decision is its opportunity cost — the value of the next-best alternative that is given up.

Adam Smith: The Father of Economics

By making choices in how we use our time and spend our money we give something up. Indeed, the consumers may have a greater choice of a number of private-sector producers.

Similarly, the greater use of price mechanism will provide an automatic and quick way to signal to producers what consumers want. Economics deals with individual choice, but also with money and borrowing, production and consumption, trade and markets, employment and occupations, asset pricing, taxes and much more.

Virtually all resources are scarce, meaning that more of them are desired than is available. When unlimited wants meet limited resources, it is known as Scarcity. It is not surprising that they often decide that the benefit of a college education is not worth the cost. Prices are decided by the Price mechanism i.

The market economy or laissez-faire system or capitalist economy.

Economics Basics

Scarcity occurs because human wants exceed the limits of available resources. These three questions are dealt with in different ways in each and every economy.

Basic economic ideas and resource allocation

Those firms, which do not produce what people want at low cost and low prices, may go out of business. Obviously, these do encourage industrialization and economic development.

There are two problems with this calculation. The opportunity cost of the decision to invest in stock is the value of the interest.

If they are effective in meeting the needs of their customers, they will enjoy the financial rewards. As a result, he is responsible for popularizing many of the ideas that underpin the school of thought that became known as classical economics.

This led to the increase in imports and exports and countries judging their value accordingly. He wrote, "Thus it is on one side the study of wealth; and on the other, and more important side, a part of the study of man.Meaning of scarcity and the inevitability of choices at all levels (individual, firms, governments) – Opportunity cost – Basic questions of what will be produced, how and for whom Unlimited Wants Human beings, in order to survive need a lot of things.

Some of these things are very important for our existence. For example, food, [ ]. Basic economic ideas Scarcity, choice and resource allocation – Meaning of scarcity and the inevitability of choices at all levels (individual, firms, governments) – Opportunity cost.

Basic Economic Ideas

CHAPTER 1 – BASIC ECONOMIC IDEAS CORE: AS Level Basic economic ideas (a) Scarcity, choice and resource allocation i. Meaning of scarcity and the inevitability of choices at all levels (individual, firms, governments) ii. Cambridge Int'l AS/ A Level Economics Learn with flashcards, games, and more — for free.

1. Basic Economic Ideas. - Free download as PDF File .pdf), Text File .txt) or read online for free.5/5(2). Chapter 1 Basic economic ideas and resource allocation Opportunity cost Having to select one option involves an opportunity cost.

Opportunity cost is the best alternative forgone. Due to the economic problem of wants exceeding resources, economies have to .

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Basic economic ideas
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