Question

In what ways does "scarcity" play a role in your daily life and decision making?

In answering this question everyone should also consider discussing:

How the invisible hand of self interest influences our decision making

The four principles that guide choices made by individuals

Explaining how trade-offs and opportunity costs fit into the decision making process

Possibly look at charting a Production Possibility Frontier that illustrates a specific decision

**PLEASE type your answer**

Answer 1

Shortage of assets mirrors the relative inadequacy of assets to fulfill the boundless needs and wants. For instance. Land is constrained on earth and land can be put on numerous utilization which implies arrive has interchange employments. Since commend has substitute employments. Each utilization of commend includes a cost. This cost incorporates the open door cost of not picking the land for alternate purposes.

At the point when business analyst discusses shortage they suggest the shortage of assets. The shortage of capital land and work to deliver a given level of yield. These assets are known as components of creation and are restricted by nature. Judicious use of all the resources requires zero wastage and efficient utilization of resources. In this particular sense, scarcity becomes the most important concept in economics. Invisible hand theory relates to the undisturbed forces of demand and supply in the market. For most of the goods and services. The market determines the quantity and the price which appears to be adjusted by invisible hands. There are no price controls in such a market, nor a subsidy or a tax. This result is simply the outcome intrigued monetary operators who are guided by their own particular utility augmenting decisions given the limitations. Rivalry in the market guarantees that the market amount is created with minimum conceivable cost. At the same time, it endeavors to distribute the assets generally productively.

Scarcity can be used in observing behavior in daily life. People are bound by money and yet they have so many desires to be satisfied with the given level of money. This implies they need to settle on a decision and face an exchange off for choosing which want to fulfill in light of the confinement forced by cash. In this sense the idea of PPC and opportunity cost winds up apropos Production possibility curve is drawn between any two combinations of goods, say, automobiles and breakfast cereal. The curve is concave to origin and this is because of increasing opportunity cost of one of the product. Note that initially the country is producing only automobiles at point P. As the nation draws resources from one sector to the other, from automobiles and breakfast cereal, the resources which were more productive in automobiles and are less productive in manufacturing of breakfast cereal, experience increasing opportunity cost because they are not perfectly substitutable in both goods.

As we moves from one corner to the other down the curve at point R. there is a gradual reallocation of nation's scarce productive capacity to larger and larger number of other good which continuously increases the opportunity cost. The MRT or the marginal rate of transformation measures this opportunity cost. Hence there is a trade-off between automobiles and breakfast cereal. To have more of breakfast cereal. The country needs to create less of vehicles. Opportunity cost is the measure of forfeit made, the cost of option, that isn't picked over the favored option. At the point when a country delivers in excess of one great. It takes away a few assets from its generation and reallocates them in others.

Scarcity is however not universally true. Not all the places and all the goods are scarce. A given good at a specific point of time and at a specific place might not be scarce at all. There are cases when quantity demanded is greater than the quantity supplied and in that case, a good becomes scarce. Similarly there are cases when the quantity supplied is greater than the quantity demanded and in that particular case it would become a surplus and is no longer scarce.