Microeconomics: Concepts of Want, Scarcity, Factors of Production and Choices

Running head: MICROECONOMICS
Microeconomics
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Author Note

1MICROECONOMICS
Table of Contents
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................3
References........................................................................................................................................5

2MICROECONOMICS
Answer 1:
Economics, as a subject, is based on several conceptual pillars, the primary ones being
those of want, factors of production, scarcity and choices. These concepts are interlinked both
from the perspective of the individuals as well as the society.
The term “want”, in terms of economics refers to the desires of individuals, which can be
satisfied, with the consumption of goods and services. For the production of each commodity or
service, “factors of production” are required, which are of four types- land, labor, capital and
entrepreneurship. All the factors of production are however limited in supply in the world, which
gives rise to the concept of “scarcity” in economics (Baumol & Blinder, 2015). From the
perspective of society, the term scarcity in economics refers to the constraint in the supply of all
the resources of production, which also limits the production of all types of goods and services.
Again on the perspective of individuals, there remains scarcity in their affordability due to the
presence of income constraint. This concept of “scarcity” gives rise to the notion of “choice”
(Frank & Cartwright, 2013).
As resources are scarce, therefore one of the primary challenges faced by the society is
the decision regarding what to produce, how much to produce and for whom to produce. This, in
other words, indicates towards the fact the society needs to face the trade-offs regarding the
production of different goods and services such that the welfare of the society is maximized
(Hall & Lieberman, 2012). On the other hand, from the perspective of an individual, due to the
constraint in the purchasing power, the individual needs to face different tradeoffs while
choosing the optimal commodity bundle, which will maximize the satisfaction of the same,
thereby bringing in the notion of “choice”.