what is economics
Date Submitted: 04/27/2001 00:23:38
Category: / Law & Government / Government & Politics
Length: 1 pages (301 words)
Category: / Law & Government / Government & Politics
Length: 1 pages (301 words)
Economics: the study of how people choose to use their limited/scarce resources to satisfy their unlimited wants
Economic choices incur economic costs (called opportunity costs)
Opportunity cost: value of the best alternative forgone
[NB: note OC is the BEST alternative forgone and NOT ALL alternatives]
e.g. Explain which of the following are part of your OC of being a student.
1) the money you spend on haircuts
2) the holiday you would have taken if …
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…is his OC for the incident?
OC= Out-of-pocket loss + R5 000
Match fee loss + R10 000 2 matches
Appearance fee loss + R20 000 2 matches
BUT insurance fee gain R1 000 2 matches
Total R63 000
Therefore in our world there are three unsolvable problems:
1. Scarcity
2. Choice
3. Opportunity costs
What are the remaining solvable economic problems:
1. Allocation function (WHAT to produce and WHAT quantities? i.e. output)
2. Production function (HOW to produce? i.e. input)
3. Distribution function (FOR WHOM to produce?)
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