Introduction to Economics: Fundamental Problems, Scarcity, Opportunity Cost, and Demand

BB106

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................4
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Economics is a branch of knowledge which is concerned with consumption, production
and the transfer of wealth. The standard definition of this is that it is a social science which is
directed at satisfaction of the wants and needs by allocating the scarce resources that have
alternative uses (Haig, (2020)). This essay will cover definition of economic, fundamental
problem of economics using concept of scarcity, opportunity cost and production. Further it is
added that supply and demand diagram are shown and explain why increase in demand differs
from increase in quantity demanded.
TASK 1
Economics is a scientific study of the ownership, exchange and use of the scarce
resources which is often shortened to science of scarcity. It is the social science as it makes use
of the scientific methods in order to build the theories which may help in explaining behaviour of
groups, individuals and organizations.
The economic activities are dependent on production, distribution and the disposition of
the goods and services which have ability to fulfil the requirements of humans. There are
generally three fundamental problems of economy which includes firstly what to produce
which refers to decisions in regard to selection of the commodities and quantities which is
required to be produced. As resources are limited or may be scarce, it is not possible to fulfil
every demand of society. Therefore it is necessary to decide what is required to be produced and
what quantity. Scarcity is basic problem in economy which is the gap between the limited
resources and the limitless wants of people. For this, people must make such decisions as to how
the resources can be allocated efficiently so that basic needs are satisfied.
Second is how to produce which is concern with choice of techniques which is needed to
be used and adopted in producing goods and services. There are majorly two techniques, labour
intensive which requires more labour and less capital and second is capital intensive technique
which involves more of the capital and less use of labours. For example UK prefers capital
intensive technique such as machineries, equipments while china prefers labour intensive which
engages more humans in producing goods (Saviotti and Metcalfe, (2018)).
Third is for whom to produce which is concerned with producing for which section of
the society. For instance, there is more demand of basic commodities such food, drinks, etc. and