The Economic Problem of Scarcity and Resource Allocation

Business economics

Contents

Introduction        

Task 1 understand microeconomics theory relating to markets        

1.1 The economic problem of scarcity and resource allocation        

1.2 How equilibrium in a market is achieved        

1.3 evaluate the importance of differing market systems        

And        

1.4 evaluate the role of opportunity costs in determining how economies make decisions        

1.5 The importance of elasticity in market interactions        

Task 2 Understand the impact of market power on an economy        

2.1 The implications of pricing and objectives on a business firm’s operations        

2.2 How prices are set in different market structures        

And        

2.3 How a firm’s behavior is affected by: ● their market structure ● operations        

2.4 The impact of regulation on market power in given situations        

Task 3 Understand the role of government in the macroeconomic environment        

3.1 analyze of the structure of an economy has changed in the 21st Century giving the arguments for this change        

3.2 The tools available to meet macroeconomic policy challenges        

And        

3.3 The success of a government’s policies in achieving macroeconomic objectives        

3.4 The economic performance of an economy in the global market        

Task 4 be able to apply economic theories to the globalization of trade        

4.1 The theory of comparative advantage using relevant illustrations from emerging economies        

4.2 The advantages and disadvantages of free trade for development using appropriate case studies        

4.3 The impact of emerging economies on the developed economies        

4.4 The impact of recent domestic and global economic shocks to the economy        

Conclusion:        

References        

Introduction

The report which is assigned is on economics elated to business. In business situation everywhere economics is needed so much. For taking decision in every steps of life economics is very essential not only for the business purposes. If the consumers have the low ability they will buy less product the less can be quantity or can be price. But if the consumers have the availability on money they will surely buy a good product by spending a lot of money. The business man have understand the situation and take decision on the basis of the situation. If the business man can understand the situation well they will surely get profit from it. And they will be very helpful to understand situation if they have the ability to understand the economics.

Task 1 understand microeconomics theory relating to markets

1.1 The economic problem of scarcity and resource allocation

The main economic problem is the scarcity. The scarcity means the difference between or the competition between the limited resource and unlimited wants. The resource have to be decorated in a way to promote the main aims. The aims are equity and efficiency.

As an employee of Institute for fiscal studies after researching on the market it is found that The following three question are arise in the problem of economic scarcity and resource allocation;

1. How to produce
2. What to produce
3. For whom to produce

The main three problem are given below:

Lack of productive efficiency: the productive efficiency means the absence of waste in production procedure. It refers the question “how”. The business have to produce the right thing at the right time and the required quantity also. Here the business man have to bear the knowledge of production procedure. Without this it is almost impossible for the business to overcome this type of problem.

Lack of allocative efficiency: The allocative efficiency is the process to allocate the product among the inhabitants of the society. The power of the consumption of the inhabitants of the society is so much important in this section. It refers the question “what’’.

Lack of distributive efficiency: Distributive efficiency means the efficiency to distribute the al product in the market. Here it can said that produce those quantity which is needed for the society members. So it is the task to sell all the product in the market. This section fulfil the question “for whom’’(Amsterdam, 2010).

1.2 How equilibrium in a market is achieved

The relationship between the quantity and price are expressed by the supply and the demand curves. The equilibrium is exists when the supply and demand are equal. The curves effect on the large business as well as on the small business as there is include the factors of quantity and price. The consumers and the combined business actions affect the supply and demand curve in different industries. After doing investigation on the market as an employee of fiscal institute for studies the way to achieve equilibrium in a market is given below:

1. Shifts: The demand and supply curve assume that the all things are constant. And if they are not there is an upward and downward shift is exist which means the whole curve change down or up.
2. Basics: the curves are the plots of the price on the horizontal and vertical which is correspondently X-axis and Y-axis. Here the demand curve is a curve of downward slopping which show the inverse relationship between the quantity and the price because demand falls when price rise and demand rise when price falls.
3. Shift effect: in the supply and demand curve the upward shift affect the quantity and price of equilibrium. If the shift is upward it means supply decreases but the demand is steady. The price increase but quantity falls.
4. The intersection of demand and supply curves arte the equilibrium price. Markets spread equilibrium because prices that above or below for an equilibrium price which lead the shortage and surpluses (Amsterdam, 2010).

1.3 evaluate the importance of differing market systems

And

1.4 evaluate the role of opportunity costs in determining how economies make decisions

Depending on the companies and the industry there are various types of market system are exist in the market. The impotency for the business is to understand the type what they are operating in their marketing system to make price decision and in many other sectors. As an employee of the institute of fiscal studies after researching the following impotency in differing market and the role of opportunity costs are found.

Perfect Competition: Which market system is characterized by many sellers and buyers are called perfect competition. Here the number of buyers and sellers are infinite. This type of marketing system is very good for the both buyers and sellers as they can buy their product or sell their product anywhere they want (Zhang, 2000).