Question

Short Answer Questions: 1.) What does the term "economizing problem" mean for an individual and for society? As part of your answer, include the four economic resources and the opportunity cost in your answer. 2.) What are the four assumptions in the production possibilities curve and how can unemployment be illustrated with that curve. You do not need to draw it, you need to explain it. Additionally, what does it mean when the curve shifts to the right? 3.) Explain how the market system provides a strong incentive for technological advance and creative destruction. Within your answer, provide 3 virtues of the market system. How does the circular flow model fit into this discussion. 4.) Research and provide the link for...any product or service that may have been introduced in the last year that would demonstrate how a demand or supply curve could move to the right or the left

Answer 1

Answers- 1.

The foundation of economics is the economizing problem: society's material wants are unlimited while resources are limited or scarce.

• Unlimited wants (the first fundamental fact):
  • Economic wants are desires of people to use goods and services that provide utility, which means satisfaction.
  • Products are sometimes classified as luxuries or necessities, but division is subjective.
  • Services satisfy wants as well as goods.
  • Businesses and governments also have wants.
  • Over time, wants change and multiply.
• Scarce resources (the second fundamental fact):
  • Economic resources are limited relative to wants.
  • Economic resources are sometimes called factors of production and include four categories:
    • Land or natural resources,
    • Capital or investment goods which are all manufactured aids to production like tools, equipment, factories, transportation, etc.,
    • Labor or human resources, which include physical and mental abilities used in production,
    • Entrepreneurial ability, a special kind of human resource that provides four important functions:
      • Combines resources needed for production,
      • Makes basic business policy decisions,
      • Is an innovator for new products, production techniques, organizational forms,
      • Bears the risk of time, effort, and funds.
      • Resource payments correspond to resource categories:
      • Rent and interest to suppliers of property resources,
      • Wages and salaries to labor resources,
      • Profits to entrepreneurs.
      • Quantities of resources are limited relative to the total amount of goods and services desired.

The factors of production are resources that are the building blocks of theeconomy; they are what people use to produce goods and services. Economists divide the factors of production into four categories: land, labor, capital, and entrepreneurship.

When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.

Answer 2

The four key assumptions underlying production possibilities analysis are: (1) resources are used to produce one or both of only two goods, (2) the quantities of the resources do not change, (3) technology and production techniques do not change, and (4) resources are used in a technically efficient way.

Production possibilities, which analyzes the alternative combinations of two goods that an economy can produce with given resources and technology, indicates unemployment when production is inside the production possibilities curve. Unemployment means resources that could be used for production are not being used.

The basic idea is that anything that causes economic output to increase or decrease will shift this curve. ... When the curve shifts outward, or to the right, that means output is increasing. When the curve shifts inward, or to the left, that means output is decreasing.

Answer 3.

The free market provides rewards for people or firms who can reduce costs or provide more useful products. Technological advances tend to allow production at lower costs, and to allow production of more useful products.

The market -- defined in a narrow sense -- is both good and bad for technological advances. First, the market is huge, so there are potentially great rewards for making goods cheaper and of higher quality. BUT, since the same idea can be reproduced billions of times, the market will not truly compensate the new idea. For this reason, we also need intellectual property rights, in addition to the Market.

when companies compete fiercely in the global market to satisfy increasing cost and quality conscious and demanding consumers, they seek technological solutions to survive. Necessity for survival becomes the father of technological inventions and so the creativity is destructed.

The 3 virtues of market system.

First, the market system promotes efficient use of scarce resources. Products are produced in the least costly way and the products most desired by society get produced.

Second, the market system provides incentives for continual improvement and innovation. Rewards are given to entrepreneurs, workers, and consumers who attempt to make the best use of scarce resources.

Third, the market system gives great support to individual freedom for producers, consumers, and workers. Each group is able to pursue their own self-interest and thus promote the social interest.

Since, the circular flow model represents how goods, services, and money move through our economy. There are two major actors known as households and firms. Firms offer goods and services for households to consume. They also offer incomes to the households, it fits into this discussion.