Quiz 1: Economics and Economic Reasoning
All the resources are scarce and have limited availability. Economics is study of allocation of resources and it also tries to answer the three basic questions of what to produce, how to produce and for whom the product is produced.Marginal cost is the additional cost of producing one additional unit of product. Marginal revenue is the additional revenue gained by selling one additional unit of product. Opportunity cost is the gain of benefit which isPeople many times regret the decision that they had made but it does not necessarily mean that decisions was not economically sound or economic decision rules were not followed. The events and life is full of uncertainty, many times the decision made is correct at one point but same decision is wrong at other time. Another reason is many decisions are made with insufficient information which increases the risk related to the decision. Passion or desire is also a ruling factor while making decision which decides the viability or feasibility of a decision.
All the resources are scarce and have limited availability. Economics is study of allocation of resources and it also tries to answer the three basic questions of what to produce, how to produce and for whom the product is produced.It is said that good economist is always objective which is true. Objectivity here means the ability to keep the individual judgements apart while studying or analyzing a problem. Economics is a science which does not deals with emotions, it deals with facts. Many times, some decisions are to be made which may hurt few substantially, but would lead in betterment of economy. This happens with government planning as well sometimes for e.g. when government has to decide to increase the amount allocated for food coupons or use that money in infrastructural development which will be very beneficial for the economic growth of the region then they have to go for objective economic analysis.
Coordinating human wants and desires with the available resources is more important than scarcity. Coordination refers to how to use limited resources for unlimited wants. It also refers to how the three central economic problems (what to produce, how to produce, and for whom to produce) can be solved. Solving these economic problems is complicated, but is an important task.