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Dave Michael C. Marimon BMLS 2H

December 13, 2013 HEC = Assignment


SCARCITY AND CHOICE

Scarcity is the fundamental economic problem of having seemingly unlimited
human wants and needs in a world of limited resources. It states that society has
insufficient productive resources to fulfill all human wants and needs. Additionally,
scarcity implies that not all of society's goals can be pursued at the same time; trade-
offs are made of one good against others.

Scarcity means that people want more than is available. Scarcity limits us both
as individuals and as a society. As individuals, limited income (and time and ability)
keep us from doing and having all that we might like. As a society, limited resources
(such as manpower, machinery, and natural resources) fix a maximum on the amount of
goods and services that can be produced.

Scarcity requires choice. People must choose which of their desires they will
satisfy and which they will leave unsatisfied. When we, either as individuals or as a
society, choose more of something, scarcity forces us to take less of something else.
Economics is sometimes called the study of scarcity because economic activity would
not exist if scarcity did not force people to make choices.

When there is scarcity and choice, there are costs. The cost of any choice is the
option or options that a person gives up. For example, if you gave up the option of
playing a computer game to read this text, the cost of reading this text is the enjoyment
you would have received playing the game. Most of economics is based on the simple
idea that people make choices by comparing the benefits of option A with the benefits of
option B (and all other options that are available) and choosing the one with the highest
benefit. Alternatively, one can view the cost of choosing option A as the sacrifice
involved in rejecting option B, and then say that one chooses option A when the
benefits of A outweigh the costs of choosing A (which are the benefits one loses when
one rejects option B).

The widespread use of definitions emphasizing choice and scarcity shows that
economists believe that these definitions focus on a central and basic part of the
subject. This emphasis on choice represents a relatively recent insight into what
economics is all about; the notion of choice is not stressed in older definitions of
economics. Sometimes, this insight yields rather clever definitions, as in James
Buchanan's observation that an economist is one who disagrees with the statement that
whatever is worth doing is worth doing well. What Buchanan is noting is that time is
scarce because it is limited and there are many things one can do with one's time. If one
wants to do all things well, one must devote considerable time to each, and thus must
sacrifice other things one could do. Sometimes, it is wise to choose to do some things
poorly so that one has more time for other things.
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Scarcity and choice are fundamentally related because they are driving forces
behind many economically-oriented human behaviors. The fact that most resources are
limited to some extent forces people to make tough decisions, and it also has a direct
affect on the pricing of things people want. For the purpose of this definition, resources
could be anything from money, to goods, time, or even more abstract things like
patience.

Most things that people want are limited, and this is the reason why scarcity and
choice are very important to economic theory. For example, it takes time, manpower,
and a host of materials to build a television set, and all those things only exist in limited
quantities. Manufacturers are generally forced to take these things into consideration
when they price items. Additionally, when people go to buy a television set, they tend to
have a limited quantity of money to spend, so they have to make a decision about
whether they want a television bad enough to spend as much as the manufacturer is
asking.



MACROECONOMICS AND MICROECONOMICS

Microeconomics (from Greek prefix mikro- meaning "small" and economics) is a
branch of economics that studies the behavior of individual households and firms in
making decisions on the allocation of limited resources. Typically, it applies to markets
where goods or services are bought and sold. Microeconomics examines how these
decisions and behaviors affect the supply and demand for goods and services, which
determines prices, and how prices, in turn, determine the quantity supplied and quantity
demanded of goods and services.


Microeconomics is defined as the branch of economics that studies how these
examples make their decisions. It is most commonly applied to markets where services
or goods are being bought and sold. The study of microeconomics also looks as how
these decisions, in turn, affect the supply and demand for these goods and services. It
also studies the determined prices and how these prices determine the quantity
supplies and the quantity demanded. Microeconomics deals with the effects of national
economic policies and one of its main goals is to analyze market mechanisms that help
to establish prices amongst services and goods, alongside analyzing the allocation of
limited resources. Microeconomics is also used to analyze market failure, i.e. Where
markets fail to produce efficient results. It can therefore describe how perfect
competition can be achieved through theoretical conditions. The branch of economics
can be subdivided into a number of fields of study. These include; markets under
asymmetric information, choice under uncertainty, general equilibrium and economic
applications of game theory.

Examples of microeconomics include individual households, business firms and
industrial activities. Any example where an individual section of the economy makes
decisions based on the allocation of limited resources are examples of microeconomics.
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Macroeconomics (from the Greek prefix makro- meaning "large" and
economics) is a branch of economics dealing with the performance, structure, behavior,
and decision-making of an economy as a whole, rather than individual markets. This
includes national, regional, and global economies. With microeconomics,
macroeconomics is one of the two most general fields in economics.

Macroeconomics is a social science that studies an economy at the aggregate
(or economy-wide) level. For the sake of simplicity, one can consider the discipline of
macroeconomics as being composed of three interrelated components: the key
attributes that characterize a macroeconomy; the key macroeconomic theories that
explain how these attributes behave over time; and the key macroeconomic policy
recommendations that emerge from the macroeconomic theories.

Examples of macroeconomics include Land-Lordism, Government, Labour,
House-Holding (and Consumption), Product-Making (management thereof), Capitalism,
Banking and Financial Handling.