Relationship between scarcity choice scale of preference and opportunity cost

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relationship between scarcity choice scale of preference and opportunity cost

Explain how PPC relates to scarcity, choice and opportunity cost. Choice is reflected by the need for society to choose among the series of points A change in the tastes and preferences of society will lead to a movement. Describe The Relationship Between Scarcity, Choice And Opportunity Cost? is the lack of kinenbicounter.info, is a preference for one thing over another. Opportunity cost is a key concept in economics, and has been described as expressing 'the basic relationship between scarcity and choice.

How are scarcity, choice and opportunity cost related?

Suppose there are only two goods produced in the economy. The PPC shows all the different combinations of the two goods that can be produced in the economy when resources are fully and efficiently employed, given the state of the technology [definition of PPC]. Overview on how PPC reflects scarcity, choice and opportunity cost The side diagram is a production possibility curve.

The PPC is a series of points rather than a single point.

relationship between scarcity choice scale of preference and opportunity cost

Explanation and elaboration on how the PPC reflect scarcity An increase in the production capacity in the economy will lead to an outward shift in the PPC resulting in a decrease in scarcity and vice versa [point]. When the PPC shifts outwards, some of the previously unattainable points will become attainable.

Using the PPC, explain the concepts of scarcity, choice and opportunity cost. [10]

The production capacity in the economy could increase due to an increase in the quantity or the quality of factors of production [explanation and elaboration]. Explanation on how the PPC reflect choice A change in the tastes and preferences of society will lead to a movement along the PPC which reflects a change in choice [point]. The tastes and preferences of society may change due to technological advancements [explanation and elaboration].

For instance, the invention of the smartphone and tablet computing has led to a change in the tastes and preferences of society towards electronic publications.

As such, the market may be more inclined to produce more electronic publications [example]. Explanation on how the PPC reflect opportunity cost The PPC is concave to the origin because the opportunity cost of producing each good increases as its quantity increases [point]. This is because resources are not equally suitable for the production of different goods. As the economy produces more and more of a good, it has to use resources that are less and less suitable for producing the good to actually produce the good.

Production Possibilities Curve- Econ 1.1

Therefore, increasingly more units of other goods have to be given up to produce each additional unit of the good [explanation and elaboration]. Inevitability of choices Each and every level of economic agent individuals, firms or government has to make the choices as all of them are confronted with central economic problem scarcity. Governments have to decide on the best possible way to allocate resources example — where and what kind of factories must be builtthe firms have to decide how to maximize profit what is the most efficient way to produce goods and individuals have to decide how to maximize their welfare which goods will give them most satisfaction.

In the process of making this choice they have to give up other alternative so the concept of opportunity cost is applicable for each and every level of economic agents. The basic economic questions There are some basic questions faced by every society.

How they are answered depends largely on the type of economic system the country has. What to produce primarily depends on consumers in free market.

relationship between scarcity choice scale of preference and opportunity cost

The consumers choose the product they like and thus their choices direct the types of production that should be carried out. The firms will follow this because this is the most profit maximizing combination.

Sometimes the government too can decide what to produce. The government may decide to produce an essential good or service which everyone ought to have.

Scarcity, choice and opportunity cost

This question will be answered by those supplying the goods and services. If the supplier is a private firm, it will seek to use the method which will give the maximum profit. For example, production can be done using labour intensive method and capital intensive method. The private firm will decide on the method which will give lowest average costs. If the government is the supplier, it may try to use the method which promotes welfare of the society rather than maximising the profit.

For whom to produce?

relationship between scarcity choice scale of preference and opportunity cost

For whom to produce will also depend on the suppliers government and private firms. The consumers are the target of production, but the kind of consumers the firm or the government wants to target is the question.

relationship between scarcity choice scale of preference and opportunity cost

The government usually produces for the general public where as the private firms can seek to maximize profit by producing for the high and rich level customers as well as the general public.

In simple words, the production is done for those who are willing to pay.