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Basic Concepts of Economics (pdf)

   

Added on  2021-04-16

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Running Head: BASIC FOUNDATIONAL ECONOMIC CONCEPTBasic Foundational Economic ConceptMohammed Rahman Davenport University
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BASIC FOUNDATIONAL ECONOMIC CONCEPT1Table of ContentsAnswer 1:.........................................................................................................................................2Answer 2:.........................................................................................................................................2Answer 3:.........................................................................................................................................3Answer 4:.........................................................................................................................................4Answer 5:.........................................................................................................................................5
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BASIC FOUNDATIONAL ECONOMIC CONCEPT2Answer 1:Scarcity implies an economic condition where a product, with its present market demand,has limited availability (Kalaitzi, Matopoulos, Bourlakis & Tate, 2018). This concept also hasanother implication from the economic point of view, which states about the limited purchasingpower of an individual where the person has unlimited wants. Increasing demand for a resource or a factor of production over its limited supplyindicates that the concerned resource is becoming scarce. The manager can face this economicphenomenon from two different aspects, which are demand induced and supply induced scarcity.Remaining the supply at the same level, when the demand for a resource of production increases,scarcity occurs that leads an increase in price (Pedro-Monzonís, Solera, Ferrer, Estrela &Paredes-Arquiola, 2015). Supply induced scarcity, states the same scenario but from the supplyside perspective. In both situations, the manager is going to face an increasing amount of pricefor that resource.Due to resource scarcity, it is essential for the production management team to choose analternative production strategy with alternative and available resources. In this context, theconcept of opportunity cost has played a vital role regarding the selection of alternative resources(Kalaitzi, Matopoulos, Bourlakis & Tate, 2018). The opportunity cost refers the value that aproducer losses by choosing its best alternative. Answer 2:Economic profit states the situation where the amount of total revenue of a firm exceedsits total costs. Total revenue implies that amount, which the firm earns by selling its output in
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