economic concepts and how they apply to the world around us

Expert Solution

Economics involves production, distribution and consumption of goods and services. In other words simply allocation of limited resources with unlimited wants in the society.

There are five basic concepts in economics which are as follows:

1) Demand and supply- Basically demand is the quantity of goods a consumer wants to purchase during a period of time and supply is the quantity of goods a seller wants to sell at a particular price in a given period of time. Supply and demand is the main component of the market. Whole world is driven by this supply and demand principle. Direct relation of economic growth with market's supply and demand. More demand more profits higher will be the price. High supply less demand less profits. For example, crude oil demand in the market depends on the demand high demand high price are charged from the countries. More profits the world economies are growing and becoming wealthy.

2) Scarcity- The world has limited resources that means scarcity of resources with unlimited wants. For example, when people died because of famine in 19th 20th century when there were scarcity of food.

3) Cost and efficiency- Basically people would prefer the opportunity cost concept which means choosing the next best alternative for forgone product. They will try to maximize profit and minimize costs. Every rational consumer in the world follows the same concept.

Economic efficiency means when maximum output is obtained from the given set of inputs with minimum wastage. For example, nowadays technology has replaced the the human labors. Because it provides economic efficiency around the globe with saving cost and maximizing profits.

4) World of specialist- Professionals and experts are running the world. Because specialization of labor minimizes the costs of the company because he gets efficient in one work which increase the production, distribution and consumption. For work efficiency specialist are working for the companies in the economies.

5) Rewards and benefits- whole world is driven by this concept if someone will find his benefit in the tast then only he will prefer it otherwise not. Maximizing profits, minimizing costs, maximize output and minimize inputs are all the examples comes under this concept.

Big-big companies are giving bonuses and rewards to their employees in the form of cash and gifts.

Rahul Sunny answered 6 months ago

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