Week 3 Chapter 2: Economic Problem - Scarcity and Choice PDF

Week 3 Chapter 2: The Fundamentals Economic Problem: Scarcity and Choice presented by: Angel Arreglado Elijahseth Cantada Kristine Navarra  DEFINE SCARCITY, CHOICE, AND OPPORTUN...

Week 3 Chapter 2: The Fundamentals Economic Problem: Scarcity and Choice presented by: Angel Arreglado Elijahseth Cantada Kristine Navarra  DEFINE SCARCITY, CHOICE, AND OPPORTUNITY COST SCARCITY CHOICE OPPORTUNITY COST lack of demand next best alternative. resources or shortage A missed out a decision or option opportunity when of supply of a consumer choosing one choice over the other. (ex. Bidding at an auction) (ex. a customer is on a tight budget) (ex. As a consumer, buy ingredients for dinner or order take-out?) What is Scarcity? Scarcity occurs when there is not enough resources to meet the unlimited wants and needs of individuals. This means that we have to make choices about how to allocate our limited resources to satisfy our wants and needs. Scarcity is a fundamental problem because it forces us to make trade-offs and prioritize our spending. Types of Scarcity: 1.Physical Scarcity: This occurs when there is not enough physical resources (e.g., food, water, shelter) to meet the needs of individuals. 2. Opportunity Scarcity: This occurs when there are not enough opportunities (e.g., jobs, education, healthcare) to meet the needs and wants of individuals. 3. Time Scarcity: This occurs when there are not enough hours in the day or time to complete tasks and achieve goals. The Economic Problem: The economic problem is the result of scarcity and can be summarized as: Unlimited wants and needs Limited resources Choices must be made about how to allocate resources  DESCRIBE HOW A FIRM MAKES CHOICES BASED ON LIMITED RESOURCES RESOURCE ALLOCATION COST-BENEFIT ANALYSIS OPPORTUNITY COST Firms take into Firms have to choose Firms use cost-benefit account the how to divide up their studies to weigh the opportunity cost of finite resources, which possible advantages every action, which is include labor, capital, of various solutions the worth of the best and raw materials, against their option given up in among different associated expenses. favor of a particular projects or goods. option.  DESCRIBE HOW A FIRM MAKES CHOICES BASED ON LIMITED RESOURCES STRATEGIC PLANNING EFFICIENCY IMPROVEMENTS RISK MANAGEMENT Strategic planning entails In order to maximize Risk management is establishing long-term the use of their limited evaluating the possible objectives and coordinating hazards connected to decisions to achieve these resources, businesses decisions about how to objectives. Due to resource frequently search for allocate resources and constraints, businesses must methods to increase prioritize strategy and make selecting solutions that operational reduce these risks while choices that advance their overarching goals and efficiency. optimizing possible objectives. rewards.  THE 3 ECONOMIC QUESTIONS 1. What to produce? 2. How to produce? 3. Whom to produce? RESOURCES > PRODUCERS > HOUSEHOLDS  10 PRODUCTIONS — The process that transforms scarce resources into useful goods and services. 12 INPUTS OR — Raw materials that can be used to satisfy RESOURCES 06 human wants. 14 Outputs — Finished products that can be bought by consumers. 08 15 09 16  WHAT IS MARKET EXCHANGE? the process of exchanging goods, services, or assets between individuals, businesses, or organizations in a market. It involves the voluntary transfer of ownership or control of something of value from one party to another in exchange for something of value. 05 a market exchange, the following elements are typically present: Two or more parties: The exchange involves at least two parties, each with their own goals, preferences, and constraints. Goods or services: The exchange involves the transfer of goods or services, which can be physical or intangible. Money or other mediums: The exchange typically involves the use of money or other mediums of exchange, such as credit, debt, or bartering. Mutually beneficial: The exchange is mutually beneficial, meaning that both parties agree to the transaction and believe it is advantageous to them. Voluntary: The exchange is voluntary, meaning that both parties are free to accept or reject the offer. Market exchanges can occur in various forms, including: Cash transactions: Where money is exchanged for goods or services. Bartering: Where goods or services are exchanged without the use of money. Credit transactions: Where one party agrees to provide goods or services in exchange for payment at a later date. Online marketplaces: Where goods or services are exchanged online through platforms such as e-commerce websites or online marketplaces. PRODUCTION TRACKING SYSTEMS PRODUCTION TRACKING SYSTEMS MONITOR AND RECORD MANUFACTURING PROCESSES IN REAL-TIME USING SENSORS AND DATA INTEGRATION WITH MACHINERY. THEY PROVIDE DETAILED DATA ON PRODUCTION RATES, EQUIPMENT PERFORMANCE, AND QUALITY METRICS. BY ANALYZING THIS DATA, FIRMS CAN GENERATE REPORTS, MANAGE INVENTORY, AND OPTIMIZE OPERATIONS TO IMPROVE EFFICIENCY AND PRODUCT QUALITY. INVENTORY MANAGEMENT TO DETERMINE PRODUCTION NUMBERS, INVENTORY MANAGEMENT KEEPS TRACK OF RAW MATERIALS, WORK-IN-PROGRESS, AND FINISHED COMMODITIES. BUSINESSES ASSESS THE QUANTITY OF GOODS PRODUCED AND MODIFY INVENTORY LEVELS BASED ON A COMPARISON BETWEEN THE AMOUNTS OF MATERIALS UTILIZED AND THE OUTPUT OF FINAL PRODUCTS. PRODUCTION REPORTS PRODUCTION REPORTS DOCUMENT AND SUMMARIZE THE QUANTITY OF GOODS PRODUCED OVER SPECIFIC PERIODS. THEY PROVIDE DETAILED INSIGHTS INTO PRODUCTION RATES, MACHINE EFFICIENCY, AND WORKER PERFORMANCE, HELPING FIRMS ASSESS PRODUCTIVITY AND MAKE INFORMED OPERATIONAL DECISIONS. QUALITY CONTROL AND AUDITS ACCURATE PRODUCTION NUMBERS AND PRODUCT STANDARDS ARE GUARANTEED BY QUALITY CONTROL AND AUDITS. REGULAR INSPECTIONS DURING MANUFACTURING ARE PART OF QUALITY CONTROL'S MISSION TO FIND FLAWS AND GUARANTEE THAT GOODS FULFILL REQUIREMENTS. AUDITS ENTAIL ROUTINE INSPECTIONS TO CONFIRM INVENTORY AND PRODUCTION RECORDS, SPOT INCONSISTENCIES, AND GUARANTEE STANDARD COMPLIANCE. WHEN UTILIZED TOGETHER, THEY SUPPORT ACCURATE REPORTING AND HIGH- QUALITY PRODUCTS.  WHAT TO PRODUCE? THE THREE COORDINATION THIS REFERS TO THE DECISION ABOUT WHICH GOODS AND SERVICES SHOULD BE PRODUCED AND IN WHAT QUANTITIES. SINCE RESOURCES ARE LIMITED, AN TASKS OF AN ECONOMY ECONOMY MUST PRIORITIZE THE ALLOCATION OF THESE RESOURCES TO THE PRODUCTION OF GOODS AND SERVICES THAT ARE MOST NEEDED OR DESIRED. HOW TO PRODUCE? THIS ADDRESSES THE METHODS AND PROCESSES USED TO PRODUCE GOODS AND SERVICES. IT INVOLVES DECIDING WHAT COMBINATIONS OF LABOR, CAPITAL, AND TECHNOLOGY SHOULD BE USED TO ACHIEVE PRODUCTION. EFFICIENCY IS KEY IN MINIMIZING COSTS AND MAKING THE BEST USE OF RESOURCES. FOR WHOM TO PRODUCE? THIS CONCERNS THE DISTRIBUTION OF THE GOODS AND SERVICES PRODUCED. THE ECONOMY MUST DETERMINE WHO GETS THE PRODUCTS, WHICH RELATES TO INCOME DISTRIBUTION, ACCESS, AND EQUITY. THIS TASK CONSIDERS HOW RESOURCES AND GOODS ARE DISTRIBUTED AMONG DIFFERENT INDIVIDUALS AND GROUPS WITHIN THE SOCIETY.  THE CONCEPT OF EFFICIENCY – FOCUSING ON HAVING MORE OUTPUTS WITH MINIMUM RESOURCES (EX. COCONUT -> THE MEAT OF A COCONUT CAN BE EATEN WHILE THE JUICE CAN BE CONSUMED AS A DRINK. THE HARD SHELLS ARE OFTEN THROWN OUT THAT WHY IT IS USED TO CRAFT INTO MORE PRODUCTS SUCH AS PLATES, UTENSILS, AND HOME DECORATIONS.) How The Market Foster Efficient Resource Allocation Producers will devote more resources to the production of goods and services with higher selling prices. This higher price incentivizes producers to allocate more resources towards the production of that good, expanding supply to meet the growing demand. Conversely, when demand for a product weakens, prices fall, signaling to producers that they should reduce production and allocate resources elsewhere.  MARKET EXCHANGE AND DECIDING HOW MUCH OF EACH GOOD TO PRODUCE By supply, demand, and price. IF THE PRICE INCREASES – SUPPLY (INCREASE) = DEMAND (DECREASE) IF THE PRICE DECREASES – SUPPLY (DECREASE) = DEMAND (INCREASE) HOW TO DISTRIBUTE THE ECONOMY’S OUTPUTS AMONG CONSUMERS? Finished products can be distributed from the manufacturing company to consumers. raw materials suppliers manufacturers consumers retailers distributors THANKS FOR LISTENING!