Term Paper on "Economics Is "The Social Science Concerned"

Term Paper 4 pages (1354 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Economics is "the social science concerned with the efficient use of limited resources or scarce resources to achieve maximum satisfaction of human material wants" (McConnell, p3, 2004). Although in neoclassical times resources were considered unlimited, today people know that we exist in a finite environment where resources, time and technological means are limited and only through their proper use, we can make sure that most of our needs are satisfied.

This is where the notions of scarcity, choice and opportunity cost intervene. Due to the fact that commodities and services are scarce, choices are required. Scarcity has become a world wide problem as the available resources are insufficient to gratify people's requirements. The resources can be classified into 4 categories: land, labor, capital and entrepreneurial ability. The opportunity cost is the true cost of any scarce good. The opportunity cost is defined as being the value of the thing you give up in order to obtain a good. For example, "the opportunity cost of an action is the highest valued alternative forgone" the Production Possibilities Frontier (PPF) demonstrates the different ways in which we can combine a variety of commodities that can be manufactured given the accessible resources and present technology. The PPF delimitates the frontier among combinations of commodities and services that can be manufactured and amalgamations that cannot. On the PPF, the opportunity cost of manufacturing more of one commodity is the output of the other commodity that has to be forgone. The three coordination tasks of an economy are: How to make use of its resources proficiently, what mixture of commodities and services to manufacture and how much of every commodity to allocate to every individual. This is when the notions of specialization and comparative advantage appear. Specialization is "the concentration on the production of only one good or service, or a few goods or services." The principle of comparative advantage sustains that each state (or individual) should specialize in the manufacturing of the commodity or service in which it is more efficient (or less inefficient).

The demand of a commodity or service is the amount customers are ready and able to acquire in a defined period of time at a specific cost. The law of demand states that "the higher the price of a good, the smaller is the quantity demanded, other things remaining the same." The supply of a commodity or service is the amount producers are ready to produce and release on the market in a defined period of time at a specific price. The law of supply states that "the higher the price of a good, the higher is the quantity supplied, other things remaining the same." We can also encounter the notions equilibrium price and the equilibrium quantity, as presented in the above figure. "An increase in demand causes an increase in both the equilibrium price and the equilibrium quantity. A decrease in demand causes a fall in both the equilibrium price and the equilibrium quantity. A rise in supply causes a fall in equilibrium price and an increase in equilibrium quantity. A fall in supply causes a rise in equilibrium price and a decrease in equilibrium quantity."

The public sector is "the division of economic and administrative life that deals with the delivery of goods and services by and for the government, whether national, regional or local/municipal." The private code tries to protect the normal citizen and investor and establish the same rules and regulation for every actor on the economical scale.

Macroeconomics is a "branch of economics that deals with the performance, structure, and behavior of a national economy as a whole" Together with microeconomics, it is one of the two most wide-ranging fields in economics. Macroeconomists deal with the learning of collective indicators such as GDP, unemployment rates, and value indexes to superiorly comprehend the way in which the economy works. The Gross Domestic Product (GDP) is the "total final value of all the goods and services produced in a given country, in a year."

If we want to measure the economic performance of a country… READ MORE

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