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UNIT 1

ECONOMIC PROBLEMS& GOALS,

CONCEPT OF SCARCITY & CHOICE

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MICRO ECONOMICS

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� NEED

� WANT DESIRE

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WANT DESIREMONEY

POWERDEMAND

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Scarcity

� “Limited quantities of resources to meet unlimited

wants.”

� Your wants are pretty much unlimited.

� All resources, goods, and services are limited,� All resources, goods, and services are limited,

however.

� This means it’s impossible for all the wants to be

met.

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Opportunity cost

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� Scarcity and choice

� Scarcity and choice and opportunity cost

� Scarcity and choice for firm

� Scarcity and choice for society� Scarcity and choice for society

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Economic problems

� Economics, then, tries to solve the problem of

scarcity.

� How to determine and what to produce

� Socialism - society� Socialism - society

� Communism – centrally

� Capitalist- laissez faire

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� Land, Labor, Capital and enterprise� Land, Labor, Capital and enterprise

� These have specific meanings in economics.

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Land

� All natural resources used to produce goods and

services.

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Labor

� Work people get paid for.

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Capital

� Human-made resources used to produce stuff or

provide services.

� This includes things like buildings, factories,

equipment, computers, paper, copy machines, etc.equipment, computers, paper, copy machines, etc.

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Enterprise

� Makes sure all the 3 factors of production are co-

operating and organsied

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Economic goals

� Full employment of factors of production

� Price stability

� Inflation

� Economic growth� Economic growth

� Free trade with nations

� “correct ” distribution of income

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Efficiency- production efficiency

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� Specialization

� Three coordination tasks

with markets and prices

� How to produce� How to produce

� What to produce

� For whom to produce

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