Economics and Scarcity

TEMA 1: LA ACTIVIDAD ECONÓMICA

1.1. ECONOMÍA Y ESCASEZ

• Economics is the study of how scarce resources are managed to produce goods and services, and how these are distributed for consumption within society.
• Economic scarcity refers to the feeling of lacking resources in relation to people's needs; it is universal and relative.
• A need is the sensation of lacking something combined with the desire to satisfy it.
• Needs can be classified by importance; primary needs are essential for survival, while secondary needs enhance well-being.
• Needs can be classified by origin; individual needs are natural (like eating) or social (like celebrating weddings), while societal needs are collective (like public transportation) or public (like public order).
• Needs can be classified by nature; material needs involve tangible items like a mobile phone, while immaterial needs are services like education.

1.2. BIENES Y SERVICIOS

• A good is any means capable of satisfying a need.
• Goods can be classified by scarcity; free goods are unlimited and free, while economic goods are scarce and not free.
• Goods can be classified by utility; capital goods are used to produce other goods, and consumer goods directly satisfy needs.
  • Consumer goods can be durable (having prolonged use) or non-durable (consumed upon use).
• Goods can be classified by nature; material goods are tangible, while immaterial goods are services and intangible.
• Goods can be classified by relationship; complementary goods are used together, substitute goods satisfy the same need, and independent goods have no relationship.

1.3. LOS AGENTES ECONÓMICOS

• Economic agents are those who participate in economic activity.
• These agents include families who consume goods and services, companies that produce goods and services and the public sector which regulates economic activity.

1.4. EL COSTE DE OPORTUNIDAD

• Opportunity cost is the value, measured in money or other units, of the best alternative that is forgone when a decision is made.

1.5. LA FRONTERA DE POSIBILIDADES DE PRODUCCIÓN (FPP)

• The Production Possibilities Frontier (PPF) illustrates the maximum possible quantity of goods and services that an economy can produce, using all available resources and existing technology.
• Graphically, the PPF is represented as a concave decreasing curve with Good X on the X-axis and Good Y on the Y-axis.
• Points on the PPF indicate efficient production, points below indicate inefficient production and points above indicate unattainable production.
• The PPF can shift to indicate economic changes.
  • A shift to the right indicates economic growth; a shift to the left indicates economic decline.
  • Shifts are caused by technological improvements or increased resources.

1.6. LOS SISTEMAS ECONÓMICOS

• An economic system is the way a society organizes itself to solve its basic economic problems.
• Types of economic systems include market economies, planned economies and mixed economies.
• In a market economy:
  • Families and businesses make decisions without state intervention.
  • This can lead to inequality and market failures.
• In a planned economy:
  • The state makes decisions without private property.
  • This can lead to a lack of incentives and inefficiency.
• A mixed economy is a combination of market and planned economies; the state intervenes to correct market failures and is the most common system.

1.7. LA MACROECONOMÍA Y LA MICROECONOMÍA

• Microeconomics studies the behavior of individual economic agents.
• Macroeconomics studies the functioning of the economy as a whole.