Scarcity And Efficiency Refers To The Twin Themes Of Economics 435x4q

Scarcity and Efficiency refers to the Twin themes of Economics; Scarcity occurs where it's impossible to meet all unlimited the desires and needs of the peoples with limited resources i.e; goods and services. Society must need to find a balance between sacrificing one resource and that will result in getting other. Efficiency denotes the most effective use of a society's resources in satisfying peoples wants and needs. It means that the economy's resources are being used as effectively as possible to satisfy people's needs and desires. Thus, the essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources.

In simple words it is a twin theme of Economics or i think it is best definition of Economics as following

Goods are scarce and our Society must use it Efficiently. scarcity-insufficient of resources like land,labour,and capital.

efficiency-maximum use of resources.

Scarcity And Efficiency The Twin Themes Of Economics Tue, 16 Aug 2011 15:29:26 | Public Goods 2

What is economics? Over the last half-century, the study of economics has expanded to include a vast range of topics. What are the major definitions of these growing subjects?1 The important ones are that economics

• analyzes how a society's institutions and technology affect prices and the allocation of resources among different uses.

• explores the behavior of the financial markets, including interest rates and stock prices.

• examines the distribution of income and suggests ways that the poor can be helped without harming the performance of the economy.

• studies the business cycle and examines how monetary policy can be used to moderate the swings in unemployment and inflation.

• studies the patterns of trade among nations and analyzes the impact of trade barriers.

• looks at growth in developing countries and proposes ways to encourage the efficient use of resources.

• asks how government policies can be used to pursue important goals such as rapid economic growth, efficient use of resources, full employment, price stability, and a fair distribution of income.

This list is a good one, yet you could extend it many times over. But if we boil down all these definitions, we find one common theme:

Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

Behind this definition are two key ideas in economics: that goods are scarce and that society must use its resources efficiently. Indeed, economics is an important subject because of the fact of scarcity and the desire for efficiency.

Consider a world without scarcity. If infinite quantities of every good could be produced or if hu

1 This list contains several specialized from economics. To master the subject, you will need to understand its vocabulary. If you are not familiar with a particular word or phrase, you should consult the Glossary at the back of this book. The Glossary contains most of the major technical economic used in this book. All printed in boldface are defined in the Glossary.

man desires were fully satisfied, what would be the consequences? People would not worry about stretching out their limited incomes because they could have everything they wanted; businesses would not need to fret over the cost of labor

or health care; governments would not need to struggle over taxes or spending or pollution because nobody would care. Moreover, since all of us could have as much as we pleased, no one would be concerned about the distribution of incomes among different people or classes.

In such an Eden of affluence, all goods would be free, like sand in the desert or seawater at the beach. All prices would be zero, and markets would be unnecessary. Indeed, economics would no longer be a useful subject.

But no society has reached a utopia of limitless possibilities. Ours is a world of scarcity, full of economic goods. A situation of scarcity is one in which goods are limited relative to desires. An objective observer would have to agree that, even after two centuries of rapid economic growth, production in the United States is simply not high enough to meet everyone's desires. If you add up all the wants, you quickly find that there are simply not enough goods and services to satisfy even a small fraction of everyone's consumption desires. Our national output would have to be many times larger before the average American could live at the level of the average doctor or big-league baseball player. Moreover, outside the United States, particularly in Africa and Asia, hundreds of millions of people suffer from hunger and material deprivation.

Given unlimited wants, it is important that an economy make the best use of its limited resources. That brings us to the critical notion of efficiency. Efficiency denotes the most effective use of a society's resources in satisfying people's wants and needs. By contrast, consider an economy with unchecked monopolies or unhealthy pollution or unwarranted government interferences. Such an economy may produce less than would be possible without these factors, or it may produce a disorted bundle of goods that leaves consumers worse off than they otherwise could be—either situation is an inefficient allocation of resources.

In economics, we say that an economy is producing efficiently when it cannot make anyone economically better off without making someone else worse off.

The essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources. That is where economics makes its unique contribution.

Philippians deals with the themes of joy and suffering.

Economic Efficiency

The fundamental economic problem is a scarcity of resources. Definition of Efficiency

Efficiency is concerned with the optimal production and distribution or these scarce resources.

There are different types of efficiency

1. Productive efficiency.

This occurs when the maximum number of goods and services are produced with a given amount of inputs. This will occur on the production possibility frontier. On the curve it is impossible to produce more goods without producing less services.Productive efficiency will also occur at the lowest point on the firms average costs curve

2. Allocative efficiency

This occurs when goods and services are distributed according to consumer preferences. An economy could be productively efficient but produce goods people don’t need this would be allocative inefficient.

3. X inefficiency:

This occurs when firms do not have incentives to cut costs, for example a monopoly which makes supernormal profits may have little incentive to get rid of surplus labour. Therefore a firms average cost may be higher than necessary

4. Efficiency of scale

This occurs when the firms produces on the lowest point of its Long run average cost and therefore benefits fully from economies of scale

5. Dynamic efficiency This refers to efficiency over time for example a Ford factory in 1920 would be very efficient for the time period, but by comparison would now be inefficient.. Dynamic efficiency involves the introduction of new technology and working practises to reduce costs over time.

6. Social efficiency

This occurs when externalities are taken into consideration and occurs at an output where the social cost of production (SMC) = the social benefit (SMB)

7. Technical Efficiency

Optimum combination of factor inputs to produce a good: related to productive efficiency.

8. Pareto Efficiency

A situation where resources are distributed in the most efficient way. It is defined as a situation where it is not possible to make one party better off without making another party worse off.

THREE QUESTIONS OF ALLOCATION:

The three basic questions that an economy must answer because of limited resources and unlimited wants and needs are: What? How? and For Whom? The basic problem of scarcity requires every society to determine: What goods to produce? How to produce the goods? And who receives the goods that are produced?

The pervasive problem of scarcity means that every society must choose among alternative uses of its limited resources. Society has only so much labor, capital, land, and entrepreneurship that can be used to satisfy the unlimited wants and needs of its . This decision-making process, more commonly termed allocation, is summarized by the three questions: What? How? For Whom?

InBs12 What? The first question society must answer is: What goods and services are produced with society's limited resources? Does society make bagels or bread? Hammocks or hot fudge sundaes? Computers or Cadillacs? Birdfeed or battleships? This question is necessary because resources are limited but wants and needs are unlimited. Society wants a lot of goods and services, but everything cannot produced for everyone. Choices must be made. Society must choose among the wide assortment of alternatives when selecting which goods to produce. How? The second question that needs to be answered is: How are society's limited resources combined to produce goods and services? Are jogging shoes made with leather or nylon? Are houses built with wood or brick? Are cars made with hightech robots or manual labor? Society, must decide which limited resources to use

for which goods. Every good cannot be made using the same resources. A hungry consumer may want a hot fudge sundae made with expensive creamy custard, but opts for less expensive ice milk. For whom? The third of the three questions of allocation is: Who receives the goods and services produced with society's resources? All goods given to benevolent economics instructors? Should goods be distributed according to shoe size? What if people buy goods with their incomes? Now, there is a thought. But, what about people who have no income? With limited resources, the production of goods is also limited. With limited goods, everyone cannot have everything. Society has to decide who gets what.