Scarcity of Productive Resources.pdf

Scarcity of Productive Resources  Terms Technical Concepts Define Use ECONOMICS Giving up of one thing in return to another.  Trade-Off Creates Opportunity Cost The alternatives we sacrifice when The...

Scarcity of Productive Resources  Terms Technical Concepts Define Use ECONOMICS Giving up of one thing in return to another.  Trade-Off Creates Opportunity Cost The alternatives we sacrifice when The value that is given up we make a decision. The most desirable alternative Trade Off = Weigh of the Cost & Benefit given up as a result of a decision The phrase "there's no such thing as a free lunch" suggests that everything comes with a cost, even if it's not immediately apparent. 1. Free Trials with Hidden Charges: Many online services offer "free" trials but require you to input your credit card details. 2. "Free" Social Media Platforms: Platforms like Facebook, Instagram, and TikTok are free to use, but you pay with your personal data. 3. "Free" Public Events: Local events, like concerts or fairs, may advertise free entry, but vendors inside charge high prices for food, drinks, and merchandise. 4. Buy One, Get One Free (BOGO) Promotions: Stores use BOGO deals to move inventory and increase sales. 5. Free Samples at Stores: While the sample is free, the intention is to tempt you into purchasing the full- sized product, benefiting the store. 6. Attending a Free Seminar: While there is no financial cost, the time spent attending the event could have been used for  Efficiency Economic Efficiency is a state where every resource is allocated optimally so that each person is served in the best possible way. Scarce Unlimited Resources Production Wants/Needs The basic economic problem is to match limited resources to unlimited wants and needs.  Equality Vs Efficiency Resources are Resources are allocated allocated optimally and equally and we have everyone gets the same share. generated as much satisfaction as possible. The optimal method of producing goods at The optimal distribution of scarce resources. the lowest cost.  Production Efficiency Productive efficiency (or production Productive efficiency means that, efficiency) is a situation in which the given the available inputs and economy or an economic system could technology, it’s impossible to produce not produce any more of one good more of one good without decreasing without sacrificing production of the quantity of another good that’s another good and without improving produced. the production technology. Production Possibility Frontier a curve that illustrates the variations the point at which a country’s in the amounts that can be produced economy is most efficiently producing of two products if both depend upon its various goods and services and, the same finite resource for their therefore, allocating its resources in manufacture. the best way possible. Production Possibility Frontier (PPF) Shows the combination of products and services that will be and will not be produced in an economy where all the productive resources are fully maximized and efficiently used.  Assumptions in the PPF There are only two products being produced. The productive resources are fully utilized or maximized. The methods of production do not change. Let’s assume that a country only produces two products, pandesal and cellphone. All productive resources, are fully utilized to produce the products. Land construct a bakery shop to make a Build a factory to make cellphone pandesal. Labor Train and learn baking skills Train and learn skills in electronics Capital Can be used for baking pandesal faster Electronics business grow Entrepreneur Can focus on making pandesal Can focus in making electronics business grow. Combination Pandesal (in Cellphones (in thousand) thousand) A 18 0 B 16 1 C 14 2 D 10 3 E 6 4 F 0 5  Chocolates Candies Possibilities A 0 300 B 1 280 C 2 240 A C 300 B D 3 180 A C E 4 100 N IMPOSSIBLE F 5 0 D I 200 D E Production S Inefficient Possibility E Frontier 100 F 0 1 2 3 4 5 CHOCOLATE 1. What is the maximum quantity of corn that can be produced, if the society produces no wheat? 2. If the society produces 15 units of wheat, what is the maximum quantity of corn it can produce? 3. Does point A represent an efficient use of resources? Explain. 4. Which point in the graph represents a combination of outputs that is unattainable? Explain. 5. Find a point on the graph that illustrates an inefficient use of resources. Explain  OC=25-20 OC=5 units of wheat 6. Suppose the society moves from (efficiently) producing only wheat to producing both wheat and 40 units of corn. What is the opportunity cost of producing these first 40 units of corn?  OC=20-0 OC=20 units of wheat 7. Suppose the society moves from (efficiently) producing 40 units of corn to producing 80 units of corn. What is the opportunity cost of producing these last 40 units of corn? 7. What point is the best choice for this society? Explain your answer.