University ECON6000: Economic Principles and Decision Making Homework

This assignment addresses key economic principles and decision-making processes. It begins by outlining the three fundamental questions in economics: what to produce, how to produce, and for whom to produce, providing examples to illustrate each concept. The assignment then explores a contemporary economic problem not explicitly mentioned in the provided chapter, focusing on the rising issue of overweight and obesity in advanced nations. It examines the economic dimensions of this problem, including increased healthcare costs, decreased labor productivity, and the strain on resources. The assignment also touches upon the law of diminishing returns in the context of labor and capital investment. The solution includes proper referencing, and a comprehensive overview to enhance understanding of the subject matter.

ECONOMIC PRINCIPLES AND DECISION MAKING
Economic Principles And Decision Making

2ECONOMIC PRINCIPLES AND DECISION MAKING
Q1 What are the three main questions in Economics? Briefly explain them with
examples.
The three main questions in economics are ‘what to produce’, ‘how to produce’ and ‘for
whom to produce’ (Chand, 2019).
Scarcity of resources limit the ability to produce unlimited quantities of every good desired.
The question what to produce has two dimensions; one, which commodities are required to
be produced and two, in what quantities each of the selected commodity is to be produced
(Phoenix Union, 2019). For example, the government of a nation may allocate spending on
defence and infrastructure. If the economy is frequently threatened by terrorist activities, a
sizable chunk would go into production of defence goods but that would mean investing less
in infrastructure projects. The question of how much to produce of the selected good would
be based on equilibrium between demand and supply and hence, a stable equilibrium price.
The second question pertains to the choice of the technique to be used for production.
Technique implies the proportion of the various factors of production that would be used. It
could be labor-intensive or capital-intensive. For example, in countries like China, where
labor is abundant and hence comparatively cheaper than capital, the economy would resort to
labor-intensive technique of production.
The question of for whom to produce refers to the category of consumers who would be
consuming the produced goods. Goods are usually produced for those people who have the
paying capacity which is, in turn, determined by income level. An economy may not be able
to satisfy all the wants of all people. Thus an automobile manufacturer which produces
luxury cars would set the price based on paying capacity of the affluent people.

3ECONOMIC PRINCIPLES AND DECISION MAKING
Q2 Give an example of a problem in the world today that is not mentioned in the
chapter but that has an economic dimension
A rising problem faced by most advanced nations is the problem of overweight population or
obesity. For example, around 66% of adults in England are overweight or obese while around
33% of children suffer from this disease based on 2015 statistics (Public Health England,
2017). Nations suffering from this issue find that spending on treatment of this problem and
related diseases like diabetes, cholesterol and heart problems has increased significantly over
the years. A sizable chunk of resources is thus wasted in managing this problem.
Another alarming consequence of overweight and obesity issue is the decrease in labor
productivity of the affected working population due to increased fatigue and other related
diseases. For advanced nations, this is a grave issue (World Health Organisation, 2017).
Developed Nations like England, the USA etc. are already reeling under scarcity of an
important factor of production viz. labor due to declining birth rate. If the future working
population or children stay overweight or obese, they would be less productive than their
healthy counterparts.
As per the law of diminishing returns, it is not worthwhile to keep increasing one factor of
production while the other factor remains constant, because, eventually the marginal product
will turn negative. This holds true for these nations as well. So, England cannot continue
investing in capital when its labor growth does not increase proportionately both in terms of
numbers and productivity.

4ECONOMIC PRINCIPLES AND DECISION MAKING
References
Chand, S. (2019, Oct 2nd). 3 Central Problems that are faced by every Economy of a
Country. Retrieved Oct 2nd, 2019, from Your article library:
http://www.yourarticlelibrary.com/problems/3-central-problems-that-are-faced-by-
every-economy-of-a-country/8812
Phoenix Union. (2019, Oct 2nd). The Basic Economic Problem. Retrieved Oct 2nd, 2019,
from Phoenix Union:
https://www.phoenixunion.org/cms/lib6/AZ01001825/Centricity/Domain/2646/eco
%20chapter%202%20concepts.pdf
Public Health England. (2017). Health matters: obesity and the food environment. Retrieved
2017, from https://www.gov.uk/government/publications/health-matters-obesity-and-
the-food-environment/health-matters-obesity-and-the-food-environment--2
World Health Organisation. (2017). Obesity and overweight. Retrieved 2017, from
http://www.who.int/mediacentre/factsheets/fs311/en/

5ECONOMIC PRINCIPLES AND DECISION MAKING
References
Chand, S. (2019, Oct 2nd). 3 Central Problems that are faced by every Economy of a
Country. Retrieved Oct 2nd, 2019, from Your article library:
http://www.yourarticlelibrary.com/problems/3-central-problems-that-are-faced-by-
every-economy-of-a-country/8812
Phoenix Union. (2019, Oct 2nd). The Basic Economic Problem. Retrieved Oct 2nd, 2019,
from Phoenix Union:
https://www.phoenixunion.org/cms/lib6/AZ01001825/Centricity/Domain/2646/eco
%20chapter%202%20concepts.pdf
Public Health England. (2017). Health matters: obesity and the food environment. Retrieved
2017, from https://www.gov.uk/government/publications/health-matters-obesity-and-
the-food-environment/health-matters-obesity-and-the-food-environment--2
World Health Organisation. (2017). Obesity and overweight. Retrieved 2017, from
http://www.who.int/mediacentre/factsheets/fs311/en/

6ECONOMIC PRINCIPLES AND DECISION MAKING