Microeconomics and Decision Making: Resource Scarcity and Opportunity Cost

This report explains how resource scarcity and opportunity cost impact microeconomic decision making in households and individuals in the UK. It examines the challenges faced by households due to scarcity of resources and rising opportunity cost. The report also emphasizes the importance of cost-benefit analysis and incentives in decision making and how market economy can be beneficial for generating revenues in a company.

Economics for
Business EFB

INTRODUCTION
The report prepared below explains Micro economics as a limited part of national economy and it is
helpful in certain ways that takes in account price determination, foreign trade policies, free market
economy, decision making process (Dahl and Lindblom, 2017). This project certainly prioritise on
focusing in decision making of an household facilities and an individual as well. Decision making
process is essential in different ways in relation to get desired results through strategies and planning
in a company. This report examines various ways through which scarcity of resources can be
managed and will impact decision making process as well. It also describes issues and challenges that
a household would face in opportunities related expenses. This report states how incentives and cost
benefit analysis would affect an organisation and the ways that would help business to grow, sustain
and develop in competitive environment.

Describe how resource scarcity and opportunity cost would
impact microeconomic decision making
Scarcity can be explained as a issue in economic areas that involves gap between scarce resources
and addresses limitless demands and requirements as well. This kind of condition demand individual
that would help to locate resources in a better way. For fulfilling basic needs and demands it is
necessary to have a proper analysis of resource that are scarce and limited in nature. In reference to
economics, scarcity explains when demand of a product or certain thing exceeds the amount of
supply. Scarcity leads to customers that help in efficient and effective decision making as how to
fulfil demands of consumers present in market, the ways that must be adapted to serve them right
and on time.

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Opportunity cost and expenses can be explained
as amount of suffering while selecting from more
than two alternatives available. It is necessary to
be considered in practical aspects of life in a
business the reason being a person plays vital role
in the process of decision making (Hanley,
Shogren and White, 2019).It assists in maximizing
profit in context of individual that performs well
with resources and costs.

Define economic concepts
 Resource scarcity : COVID situation is best for explaining scarcity of resources,
as it was observed in near past that an unpredictable situation hitted the economy
and affected the environment in unexpected manner.
 Opportunity cost: In selection process there are different options that can prove to
be helpful as an alternative for a person named Martha having the measure of $
20000 and she is having two choices that either she can invest the money in fixed
deposit and the benefit of 10% in annual return she can make better use of the
available amount for higher studies.

Evaluate and define what has been perceived as biggest challenge
for household
There are numerous issues and challenges that are faced by a respective person because of resource
scarcity and opportunity cost.
 Education and skills: At present point of time the economy consist of a large-scale population but
the challenge is to find a person who best fits the requirements of organization. There are various
jobs which need a skilled labor force to meet requirements of the company and people as well &
for that purpose proper training and development must be provided to every individual that would
make him/her liable for their related responsibilities.
 Urbanization: It is referred as an issue for an individual and for business as well in form of land,
police, water and population density as well. These are included as a resource and can impact
household and individual as well. It disturbs household as due to rise in demand rent, housing rate,
land price rises and it is not possible for every person to afford such things and this also
diminishes their purchasing power and income as well.

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 Water scarcity: Even the large-scale population is affected by natural resources such as water
because it is challenged and impacts households and individual as it is impossible for anyone to
manage life without water. Due to scarcity of water many sub things also get affected such as
agriculture can be counted as a main cause that affects a person and thus leads in shortage of
resources. It also results in loss of food, increase in wastage and the food system of an individual.
 Financial illiteracy: It is measured as a task for a person due to the reason people not being aware
of opportunity cost and how efficiently money can be used with the help of other alternatives
available. It helps to understand ways that would help in keeping money safe for near future and
better uses.

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 Cost of ownership: Every one counts it as more challenging because in includes lack of
affordable lands and also taxes such as VAT, stamp duty and service-related tax as well. Such
taxes increase the sue and home costa to which cost of ownership also rises. Due to lack in land
and tax policies people have started to switch in pre urbanism area that are not well developed
and face many problems in transit system and makes it difficult in case of affordable housing
system. This is included as a issue as it limit the visibility in recurring the maintenance expense
because of which various departments have started to contribute lower or higher expense for
balancing the total cost of ownership in facilitating the management of household. It also fails
in analyzing the data in relation with condition of asset that lead in accuracy.

Define how cost benefit analysis and incentives influence micro
economic decision making for household and individuals in UK.
Cost benefit analysis is explained as a tool that is developed for assignment of project related
benefits and monetary related aspects the reason being the project plan is giving enough return that
has been invested in a certain task. The given term evaluates both internal as well as external
expenses too in monetary related areas. The internal expenses include private cost that is evaluated in
monetary terms and external cost are reasoned in both monetary as well as non-monetary status that
takes in account external alteration and the landscape, noise charge and poll. Such terms are
necessary for household and organisation as it examines all potential related expenses and revenues
that are generated in household areas of UK. It explains profit and revenue that is earned for
covering finance related requirements of respective person in households. It further is helpful in
decision making and taking process as it explains the related profits that one person can access
before investment in a certain property is made and the money is spent in activities related to

Explain economic concepts
 Cost benefit analysis: Two upcoming project
plans were there, one costed $8000 and which
received return benefit of $12000 and whereas in
other plan the total cost involved was $11000 and
received $20000 from return in investment. The
ratio of first project recorded was 1.5 and the
other plan was 1.81 and it has been evaluated that
the project would prove to be more feasible for
the high-cost benefit ratio.

Evaluate and explain how market economy use consumer
habit of cost benefit analysis
Consumer behavior can be explained as decision making process and the actions that are
taken by an individual person who purchases goods and services for their personal uses.
There are different reasons for using consumer behavior approach that takes in account
consumer differentiation which helps in making targeted groups of similar behaviors. It also
focuses on attracting and engaging consumers with the help of various innovative strategies
and policies. It is necessary in order to develop a program which involves advertisements
that become useful for increasing the sale scale of a company (Towse, 2019).

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It is also useful for predicting and forecasting the current trend prevailing in market areas for
an effective and efficient planning of programs so that a company is able to expand its
operations which would enable them to increase their customer base as well. It is helpful for
examining the cost that would help in minimizing the overall expense and cost & increase the
profit/ revenue of a business. It can be done with the help of new and innovative goods which
helps to increase production level of a company and tap the areas that went neglected. There
are four kind of marketing economies that includes traditional, market, mixed economy and
command. It always promotes free competition in business environment. Market economy also
helps to increase the profitability and production scale in a enterprise.

CONCLUSION
The report prepared concludes that for a decision-making process it is necessary to
include the following elements that involves the resources which are scarce and the
opportunity cost that affects the person in different forms by selecting a alternative
possibility. This option also explains some of the examples concerning decision
making process in context with such above points. This report also asserts the
challenges that respective person is facing due to the scarcity in resources and rising
opportunity cost. This report also helps to conclude that how cost benefit analysis is
necessary in decision making procedure and how market economy would be beneficial
for generating revenues in a company.

REFERENCES
 Dahl, R.A. and Lindblom, C.E., 2017. Politics, economics, and welfare. Routledge.
 Goodstein, E.S. and Polasky, S., 2017. Economics and the Environment. John Wiley & Sons.
 Hanley, N., Shogren, J. and White, B., 2019. Introduction to environmental economics. Oxford
University Press.
 Leamer, E.E. and Stern, R.M., 2017. Quantitative international economics. Routledge.
 Lewis, L. and Tietenberg, T.H., 2019. Environmental economics and policy. Routledge.
 McConnell, C.R. and Brue, S., 2017. Contemporary labor economics. McGraw-Hill Education.