Supply and Demand (Annabelle, 5W)

For the first time in 16 years since 1993, fast-food chain Kentucky Fried Chicken (KFC) in Japan has announced that from April 24th 2009 onwards, all items sold at all 1,150 outlets nationwide will experience a price hike of about 7%. It is not only KFC that has announced the sudden need for consumers to pay higher prices – various other restaurants and cafes across the country have raised their selling prices, and this is mainly attributed to the sudden jump in dairy, meat and beer prices as well as the price of wheat, corn and soybeans, which are used in the chicken feed that fast-food giants such as KFC provide for their birds. This is a clear-cut example of the theory of supply and demand, which can be further understood through the use of definitions of the two terms, diagrams explaining shift and movement and examples of the theory evident in real life situations.

Firstly, what exactly is supply and demand? Supply, by definition, is the amount of product that a producer is willing and able to sell at a certain price at a given time, ceteris paribus. The Law of Supply states that price of a good is directly related to supply; for example, the supply of a good will increase as prices increase and decrease as prices decease. At higher prices, producers are more willing to offer their products for sale. Demand, on the other hand, can be defined as the amount of a product that a buyer is willing and able to buy at a specified price at a certain time, ceteris paribus. The Law of Demand states that if prices are low, more people are able to afford to buy more goods more frequently than they can at a higher price. However, if prices are high, people tend to choose to buy other cheaper goods as substitutes for the more expensive goods they can no longer afford.

The easiest way of looking at the theory of supply and demand would be through using the recent worldwide recession as an example. Millions of people all over the world lost their jobs, leaving many families with no source of income. Products that people could once afford were suddenly too expensive, even though the price of the good had not changed at all. Sale of real estate, for example, has plummeted compared to figures from early 2008, and the sale of small cars has dropped about 15% while sale of luxury cars have dropped about 50% since the recession hit. The demand for unnecessary luxury items such as jewellery and fine dining will decrease as people begin to watch their expenditure, leading to a decrease in demand for these goods. As a result, producers find that they have no choice but to sell their goods at a lower price, therefore leading to a decrease in their overall profit levels. Lower profits lead to a lower desire for producers to produce their products. Such unappealing scenarios eventually lead to a decrease in the production and supply of a good, simply because producers are unwilling to offer their products for sale when the demand for such a product is low.

The two diagrams below illustrate how the supply and demand of luxury cars has been affected by the recession.

Figure 1

Figure 2

In Figure 1 there is a shift leftwards on the demand curve from Q1 to Q2 as there is a decrease in quantity demanded of the good although price, P1, remained the same. In Figure 2 there is a shift leftwards on the supply curve from Q1 to Q2 as there is a decrease in the production and supply of the good, although price, P1, remained the same.


Supply and demand is not a difficult concept to grasp. Ultimately, everything is interlinked in one big equation – you can’t experience a change in demand without seeing some kind of change in supply, whether gradual or immediate. All around us the theory of supply and demand exists, not only appearing on the news because of the recent worldwide recession but existing continually in retail outlets, restaurants and real estate, just to name a few. The theory of supply and demand is, undoubtedly, one of the most fundamental concepts when it comes to economics and is perhaps, even, the backbone of any market economy worldwide.

- Annabelle, 5W

Demand and Supply-Gurjeitpahl (5Z)

It is feared by the entire world population that this recession is going to be the worst one to have ever hit Wall Street. Shocking news about businesses, companies, major firms and industries closing down or going into bankruptcy have made the headlines. Seeing words such as plunging, crashing, collapsing, bankruptcy, and job slashes has sure made us all very fearful of a tumultous time ahead. This brings me to my posting on Demand and Supply and how the recession has affected this crucial part of Economics.

One of the most pressing issues about the recession is the massive unemployment. People are losing jobs on such a big scale that a good fraction of them are left with absolutely nothing apart from the clothes on their backs. It is expected that 99,000 people in Singapore itself will either be retrenched or suffer a cut in their wages. Because people have less income now, they have been forced to watch their expenditures at all times.

Demand is defined as the willingness and ability to purchase a good or service. Because people's income levels have declined, the demand for many things has gone down. One such example is the decline in demand for holiday tours to other continents. At the recent NATAS fair, we realised that along with us, others in search for a break amidst this tension had opted for short trips within Asia and that too on Budget airlines. This is because we cannot afford to fork out too much money on holidays- a luxury, nor can we make our getaways too long because the longer they spend in a foreign country, the more we have to take out on food, accomodation, and transport etc. This will also set the demand for these to decline.

Supply is defined as the ability and willingness to produce a good or service. The Law of Supply states that as the price of a product increases, the quantity supplied of the product increases, ceteris paribus. With reference to the preceeding example and obeying the Law Of Demand, when people can no longer afford to pay the high prices of the expensive airlines, the quantity supplied will decrease. This will cause them to earn less profits. The possible result of companies not earning well is that they run into debt, or if it's more serious, they go into bankruptcy.

Amidst the recession, interestingly the Food&Beverage (F&B) Industry is both being affected in the good way and in the bad. Why I say this is because food is a necessity. The demand for fancy restaurants has plunged because dining in at a posh place has become inaffordable for many. Thus, as restaurants are becoming increasingly deserted, they're lack of profit earned cannot compensate for their expenses. Thus, fancy dining has been dished away to a far extent. On the other hand, people's demand for economy meals has increased. They are becoming happier about the fact on reducing the amount spent on each meal as they have to spend on this everyday. I'm sure there are many other families just like mine which just prefer to have home food.

I feel that the recession has completely upset the whole economy because in demand and supply alone, there have been so many changes and at the moment, there is no light visible at the end of the tunnel for businesses, companies, firms and industries alike.

Economics - more than a subject (Tracy - EC1)

Is it right if a 10 – year – old child wants a lot of money? I did, that’s why I determined to be a businesswoman as I thought that was the easiest way to be rich. That’s also why I decided to take Economics at higher lever, but it didn’t appear to be an easy subject at all. At the beginning, as I remember, Economics in my mind was only a dry subject with complicated concepts plus dizzy graphs; I didn’t know what the hell Economics was doing in my life. However, after 1 month fulfilled with homework about articles and news, I gradually realized that the most selected subject was not only not as boring as I had thought but also very practical as well.

Such concepts as demand and supply may seem too academic but I just realized that it can also be very close to me. “Demand” is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time. Demand is influenced by many factors such as: price, taste, price of other goods and a few other factors… In usual life, it can be clearly seen. Assumed you really care about beauty, and you go to spa every week. Because of the increase in price of cosmetic or land rental, the cost of beauty-caring service rises, it means you can’t afford for every week and hence you choose to go less instead of paying more. Taste is also another obvious factor. Coke and Pepsi should be a good example for this. Personally I think they are both the same but I still prefer Pepsi, not because of its taste but its motto and the singers or actors representing the brand. Truthfully, I used to drink Pepsi all the time but any other kinds of drink because of Britney Spears. You surely can imagine how great the strength of marketing and advertising are. That’s how the producers and entrepreneurs can affect, even control the demand for a good. Let’s consider further, because the taste of Coke and Pepsi are the same to almost everyone, if you benefit more when purchasing Coke, for sure the demand for coke will dramatically go up. Coke and Pepsi are regarded as substitutes as they can be used as a replacement of each other.

The factor which can change the demand for good but cannot be prevented is the change in total population and the age groups. According to a recent report, the number of university candidate in Vietnam has got higher 40% for the last 20 years, hence there’s greater competitiveness for all students, about which I feel very worried. In addition, there’s never been such a high demand for music player and laptop ever throughout the history, as the young section in the population is greater than ever. It’s also an incentive for the producers to release new collections or designs.

The availability and popularity of a product are determined by the demand trend of consumers. My mother is a secondary teacher, she wanted to make her lectures more appealing and attractive; she made it real by changing the way of knowledge expression and approach as well as the transfer of information and language according to what her students are fond of. That’s why many students love her lectures and hence she is well-paid at school. This may not be very relevant to economics, but it can be an extent of demand and supply that I feel really applicable to my life. My father is the director of a hospital and he made some changes in the service availability to satisfy the patients and their families. However, as a result of the rise in medicines and mechanism, which lead to not only more difficulties of providing enough services but also an unexpected rise in price of those services.

In brief, supply and demand, which are mostly known as concepts and academic knowledge in textbooks can absolutely relate to everyone’s daily life in many different ways. No matter who I will become, what job I will do in the future, I just reckon the most important thing is being able to live your life now and find joys even in the things you are not interested in. That’s what I can learn from the subject I used to hatred but not anymore – Economics.

The Effect Of Demand And Supply-Frankie Le 5V

Demand and Supply is the basics of Economics. Demand is the quantity of goods and services that the consumers are willing and be able to purchase that at a given time period, ceteris paribus. The quantity demanded of a good is affected by the price of a good, the tastes and preferences of consumers, the substitutes or the compliments.
Based on the recession of the economics, lots of companies in the world had been forced to reduced the number of workers or bankrupt. The reason for that is the profits are lower and the income of these companies decreased so that the worst thing can happen is people will lose jobs, they cant afford anything because they dont have money purchase their wants and their needs. For example the price of fuel fell to $40/barrel, so then more people will buy fuel and companies who provides that couldnt earn profits thus they will be forced to close down. However not all of these firms are being affected by the recession. The best example for this is the huge company called Apple.
Apple is one of the largest company in producing goods like computer(Mac book), Ipod, Iphone. Last year was the beginning of the recession, but Apple still increased their Net income by 14.88%(US$4.83 billion), and Operating income by 19.32%(US$6.28 billion), also their revenue(US$32.48 billion). These figures show that Apple hadnt been affected alot. Thus they dont have to worry too much about this situation.
There are some reasons why Apple can keep rising their income, the main reason is that Apple has a quite long term effect in our lives, as in their advertisements for the products such as Ipod and Iphone. Although these products have a highest technology but its being sold at a cheap price so that more and more people want to buy Apple. For example, a normal Zen mp3 player can costs me about $300 to $400, but i only have to pay $200 for the Ipod. Another reason for that is Apple has the higher quality of their products such as the quality of sound of the Ipod or Ipohne are better than others like Nokia phone or Zen mp3 player. Another minor reason is that Apple has a nice design and colors for their products. Therefore, with those reasons, Apple can survive through the recession and they can maitain the higher income and profits every year pass because they can fullfill the consumer's wants and needs by providing them fashionable and best quality goods.
After all, even now the situation of the economy is very dark scenario, it still can be boost.

Demand and Supply - Ng Yan Kai 5x

Demand and Supply is the basics of Economics. Demand is the quantity of a good or service that consumers are willing and able to purchase at a given time in a given time period, ceteris paribus. The quantity demand for a good is affected by many things such as level of income, prices of substitutes, expectations of customers and taste and preference of consumers.

Due to the economic recession, most companies and been forced to fired workers due the low level of demand for their goods and services, many companies have even been forced to close down. A recession causes you to have a lower income such as no bonuses as companies try to cut costs a even worst scenario is lossing your job, it also makes prices of necessities to increase such as fuel forcing people to take public transport more often and could even make you bankrupt. However despite all this, not all companies are serously affected by the recession. One good example of this is the Sports apparel giant Nike.

Nike is one of the few companies that have been able to put up rather good numbers during the this recession. At the end of 2008 Nike had make a profit of $391 million which was more then what Thomson Reuters (First Call) earned at that time. Despite having a drop of $400 million compared to 2007, Nike has not much to worry about as it is still seeing strong demand for their products.

One main reason for this high level of demand is due to their strong advertising. By having sports stars to wear their products, Nike is able to lure in majority of the athletes. This is because sports enthusiasts buy their products either to feel closer to their idols such as Micheal Jordan or Kobe Bryant both legends in the basketball world, while others simply but their products to gain that competetive edge against their opponents.

Another reason for the high level of demand is Nike's strong brand image due to having high quality goods and their ability to be flexible and thus maintaining a large variety of fashionable goods which is constantly changing to fit consumers' wants.

Therefore although the economic situation may seem very dark right now, there is still hope for the economy to bounce back.

Scarcity and Opportunity cost

Economics is a study of how people choose to use their resources.There are two terms in Economics which are very important.They are Scarcity and Opportunity cost.Scarcity is something we would like to possess but cannot due to low supply.For example,you like rollerblading and reading Harry Potter books and one day when you go out to the shop to purchase them,they are out of stock,you would really feel demoralized.This situation that you are facing is called scarcity.On the other hand,opportunity cost is the value of the next best choice that one gives up when making a decision.For example,when you are thinking of buying either a pair of roller blades or Harry Potter books with $100,the opportunity cost of buying the pair of roller blades are the Harry potter that you have given up.

To explain the concept of scarcity and opportunity cost,let's take oil palm production as an example.Malaysia and Indonesia are producing oil palm at a very fast rate.This is because of the good weather conditions and availability of land.They produce oil palm because of the low opportunity cost as they have a comparative advantage. At the same time,production of electronic goods ,such as handphones and computers in Taiwan is very high as Taiwan has good labour and sufficient resources to support these industries.If Taiwan were to focus on producing palm oil,the opportunity cost would be very high.

Although Malaysia and Indonesia are very good in producing palm oil,there has been a hike in palm oil biodiesel production.This has caused Greenspace to oppose palm oil as it feels that this hike results in the clearance of rainforest land.This clearance would in turn result in the death of species living in these habitats. In this case,the opportunity cost of increase in palm oil production is the loss of species in the respective habitats.

Munisha Kumra

5X

how we can relate to demand and supply in the real world

Instead of choosing to discuss the theory of demand and supply through mind boggling topics such as recession, i have chosen to discuss the theory of demand supply using the example of iPhones. For some of us (specifically me), it is honestly difficult to relate to recession with the market crashing and all that because i am not working yet, not earning my own money so it just becomes difficult to understand. 

However, taking the iPhone to use an example would be ideal since it created a relatively big hoo-hah with people from practically every age group, thus making it easier for our generation to understand and hopefully relate to. Firstly, we all have to be clear about what demand is about. The demand of a good refers to the quantity of a well-defined commodity that consumers are willing and able to buy at each stated price during a period of time, ceteris paribus. Factors that affect demand are as follows, number of consumers in the market, consumers' tastes and preferences, expectations of future prices and incomes, government policies, and last but not least, the change in the price of a substitute. 

When Apple first launched the 2G iPhone in America, practically everyone was already outside Apple outlets waiting in line for shops to open on the 29th of June (release date of iPhone) just to be the first few to get their hands on the the newest gadget. The demand for the iPhone then was possibly at it's highest as it was definitely new in the market and in back in 2007, the iPhone was very scarce. We have learnt that scarcity is the main problem in Economics. In 2007, the demand for iPhones was high. However, the price of a 2G iPhone 2 years ago was not cheap either, due to the limited amount that was being released into the market. While some consumers thought it was overpriced or those who could not afford one, they considered buying a Nokia N95 that was being released then as well. This caused their opportunity cost to be the iPhone.  Opportunity cost is known as the real cost of choosing one thing and not another and in this case, the iPhone as the latter. 

The change in price of an iPhone then would be the main factor affecting the quantity demanded. If the price of an iPhone were to increase, less people would want to purchase it, thus decreasing the quantity demanded. However, since the iPhone could only be used in America unless jail broken, people all around the rest of the world could not use it. This would definitely lead to a decrease in demand. When the demand for the iPhone falls, the quantity demanded for the iPhone at every price level falls. 

In 2008, Apple released a new and improved version of the previous iPhone- a 3G one. One which was able to work in any part of the world, not putting consumers through the trouble of jail breaking it. The demand for the new 3G iPhone therefore increased, leading to a increase in the quantity demanded. However, in Singapore, the supply of iPhones was not enough to meet the quantity demanded due to the excessive number of consumers in the market. 

Simultaneously, Blackberry released their long anticipated Bold. Consumers' tastes and preferences definitely affected the demand for an iPhone however, the price of a Bold was higher than an iPhone and in that way, consumers would rather buy an iPhone instead of a Bold. This is a clear example of how the change of the price of a substitute (in this case the Bold) affects demand. 

The use of the sale of an iPhone is a good example of demand and supply which is relatively easy to understand. It links the number of consumers in the market, tastes and preferences of consumers and the change in the price of a substitute which affects demand and supply. 

elvinacheong

Demand and Supply- Rita HLEc1

In theory, as we all know, when the economy turns down, firms can not sell their products, services can not run their system well and it leads to bankruptcy. We always assume that as GDP falls, people tend to save rather than spending, therefore, there is excess of goods which is due to more supply than demand. This situation is theoretically right and it also applies to different industry and businesses.

However, sometimes things do not always follow what they are expected to be. During the recession, there are a number of businesses still running very well; they even gain more profits than before which are due to high demand. It was proved by an article named “Bargain stores boom in downturn” in the “Straight Times, Home” on 19th February. Many bargain shops which sell groceries, plastic household items, and daily foods… such as Sheng Siong, MCP banner’s supermarkets, ABC Bargain Center and Fair Price, have increased a large number of goods to sell and have reaped much higher profits. There are some data that are collected by the newspaper which can prove how successful these businesses are running. MCP’s revenue has increased by 50% form 2007 to 2008; revenue of Sheng Siong has also gone up by 11%. Although ABC Bargain Center has the lowest fluctuation, its output has risen up about 5% recently. As demand from consumer increases, so is the revenue of these bargain shop system. So the question is why demand for these goods increases during the toughest period of the economy. The answer should be that because daily foods, groceries and household items are the necessities for everyday needs so they are considered as inferior goods which are preferred to be consumed at lower income level. In addition, these entrepreneurs decide to cut down all prices, this explains why although the economy has fallen, they may want to consume more, because prices will go up in the future if the economy improves better. Moreover, these businessmen also want to open more branches during this year, so actually, demand for land increases during recession and how it really happens? The only way to understand is value of land has dropped. Since the cost of land has fallen, risk takers prefer to invest immediately rather than waiting for the recession to end, because at that time, prices will increase higher again. In result, many landowners can turn from bad to good situation and gain more profits.

The most important thing to be mentioned here is if we want to push up the economic growth out of the recession, we have to do as much as we can to promote high level of demand again. By cutting their price, bargain shops and landowners are successful in saving their business and also have a contribution to the economy. We can not really judge if the recession has bad effect or may become good opportunities for businesses. Therefore, maybe the key factor to raise consumer’s demand is adjusting the price suitably. It can also answer why there are many entrepreneurs succeed in starting their business in the recession since prices of almost everything go down.

suppply and demand-sarah chan HL Ec2

'Office rents may slide till 2012’
‘Empty cargo ships hit record high’
‘Pump prices fall for the first time this year’

These are the headlines that have been bombarding the front pages of the newspapers for the last months. Why? As the financial crisis is fast worsening, quantity demanded for goods is falling.

Firstly, what is demand? Demand is defined as the quantity of a good or service that consumers are willing and able to purchase at a given time in a given time period, ceteris paribus. Quantity demanded has many factors affecting it. There is the expectations of the consumers, income, prices of substitutes, and tastes and preferences. These headlines that show a decrease in quantity demanded and this has of course been affected by the financial crisis we are facing.
The expectations of the future would be that the deepening financial crisis would result in the losses of jobs or downgrading of pay. This results in people consuming less due to their fear for what might happen in the near future. Offices are relocated to a less expensive building or are downsized to save costs. There is no longer a demand for goods so it is not profitable to import and export. More and more people try to economise by getting rid of their fuel guzzling cars and opt for more green ones or even public transport which results in the quantity demanded for fuel to decrease. This would also reflect the income of the people. Many have been retrenched in this financial dip and as a result have a smaller income and this results in the lower demand for goods.

Prices of substitutes also affect what these headlines say. For example, prices of substitutes such as supermarket own brands may be cheaper and people would want to buy them instead to save money and this thus lowers the necessity for imports. Today, in the newspapers, I read that this economic downturn has resulted in the flourishing of budget shops selling bargain goods. This would be a classic example of how the price of substitutes affects the demand of another good. Fuel alternatives and public transport would be cheaper and thus reduce the demand for fuel resulting in the price drop.

I think we will be seeing much more articles with headlines similar to those we have just seen and one does not know whether to laugh or cry....

Introduction to Economics

"I want more money! I want the latest edition of the ipod and I must get a new phone, I need to renew my whole wardrobe and i want to own the 30 cart diamond ring! This is all a must, i can't survive without all these being satisfied!" Well, in life you surely are not able to get anything and everything you want or desire to have. There would be obstructions along the way since resources are scarce. For example, you are a billionaire and you are willing to exchange all your wealth for the 30 cart diamond ring, you might not even get it since diamonds are rare and you don't get it just as and when they want to.

There is a conflict between the finite resources and the infinite needs and wants of humans. People cannot have everything they desire so there must be some system of rationing the scarce resources therefore Economics comes in and play a big role.

Economics is the study of rationing systems. It is a study of how scarce resources are allocated to fulfill the infinite wants of consumers.

My dreams is to start up a new line for facial products, This is when economics would be involved. Before i decide to do anything, i will have to consider the 3 basic factor. Firstly, what should be produced and in what quantities? Secondly, how should things be produced? Thirdly, who should things be produced for?

At first, i was hesitating if I should use gold or mud as one my ingredients for my facial products. However, gold are very limited and expensive therefore i have to make a choice and decide how to allocate the limited financial resources hence i will decide and make a choice between the two alternatives. I have chosen to use mud and not gold. Hence when the decision is made, the next best alternative forgone good would be known as the opportunity cost which in this case, the opportunity cost is the gold.

The factors that will involve my new line of facial products is land, labor, capital and entrepreneurship. Land involves the natural resources such as mud and gold as well as the piece of space that my company would be located at. Labor consist of both physical and mental contribution such as my company's workers and sales. The capital would be the investments such as stocks and the value of workforce as well as the machinery. Last but not least, I would be the entrepreneurship of this line of facial products as I will be the one organizing and risk-taking for my company.

In order to keep my line with the society, I would use a production possibility curve to illustrates the concepts of scarcity, choice and opportunity cost. A production possibility curve shows the maximum combination of goods and services that can be produced by an economy in a given time period, If all the resources in the economy are being used fully and efficiently and the state of technology is fixed, I would know that I have a potential output.











An outward shift of PPC can only happen if there is either an improvement in the quality or the quantity in the factors of production. A PPC is a curve because not all factors of production if production used is equally good at both since different people have different talents. For example, some people from my company may be better at making the containers for the facial products while others are better in mixing the ingredients together. Thus if one day I decide to out 50% of the workers from container making over to ingredient mixing, there will be insufficient growth, which will not be pleasant to the company.

In conclusion, in order for my new line of facial products to start up successfully, I have to ensure that utility is high. Utility is the measure of usefulness and pleasure. Total utility is the total satisfaction gained from consuming a certain quantity of product.

Emily Yiu

Opportunity Cost and Decision Making

In everyday life people are continuously forced to make decisions and for every decision made something is being given up. For instance, by spending a dollar on Coke you can’t spend the same dollar on buying a different type of drink – as a result of spending your dollar on the coke you are giving up the satisfaction you could have gotten from the purchase of a different drink. Unfortunately we all have to face more important decisions than what to drink during recess and usually the bigger the decision, the bigger the alternative that is given up. To help you get the best bang for your buck we have to look at one of the most fundamental concepts of economics, opportunity cost.

Opportunity cost is defined as "The cost of a decision expressed in terms of the next-best alternative foregone." When it comes to making everyday choices, we can use the concept of opportunity cost to evaluate the benefits that are being given up or sacrificed whenever a particular choice is made.

The opportunity cost of a choice is what Economists call a Real Cost instead of a monetary cost or price. For example, the price of a hot dog may be $2, but the opportunity cost of the hot dog is the satisfaction forgone by buying the hot dog instead of the next most desirable good (a club sandwich, or a packet of potato chips and a coke). The Real Cost of a hot dog would really be a measure of the sacrifice made in giving up the $2, whereas its monetary cost would simply be $2, the price of the hot dog.

Of course in many cases the value of the choices we make can be measured in dollars and cents but is this always possible?

Let's take a look at this example, "On a Friday afternoon, Bob decided to spend an hour spacing out in front of the TV." If Bob had chosen to spend that same hour of spare time learning how to tie his own shoelace, he might have learned an important lifelong skill – clearly the opportunity cost of Bob spacing out is the ability to tie his own shoes, is the cost of Bob’s choice something you can really put a price on?

We can’t put a monetary cost spacing out at home for an hour instead of learning to tie your shoelace – in Bob’s case the only cost we have to look at is opportunity cost of spacing out. In order to make the best possible decisions in life, we must not ignore the fact that there is an opportunity cost for every choice even if there isn't always a monetary cost for the same choice.

By looking at the cost of one choice in terms of the foregone benefits of another, the costs and benefits of the choices can be easily compared. For these reason primarily it is necessary for people to take opportunity cost into consideration.

The next time you are making a decision try asking yourself a few questions, Is there a monetary cost of what I am doing? By making decision, what are the benefits I may be missing out on? An ice lemon tea costs a dollar, but a green tea costs 90 cents. If you pick the green tea you can expect it to taste disgusting, is saving 10 cents really worth it?

scarcity and opportunity cost, how are they interlink

Before I talk about scarcity and opportunity cost, let me introduce what economics is about. When the question 'what is economics about?' is asked, the first thing that comes to people's mind is that economics is about money. In actual fact economics is more then just about money. Economics is a social science that studies how societies use scarce resources which have alternative uses to produce goods and services to satisfy unlimited human wants. It focused primarily on the analysis of the societal systems of production, distribution and consumption of goods and services.


Now that we know how is scarcity related to economics, what exactly is scarcity? Humans are greedy creatures. Humans wants lots of things in the world such as money, better clothes, better transportation and food, making human wants unlimited. However all of these wants cannot be fulfilled. This is due to fact that resources needed to produce goods are limited, thus these resources become scarce. All societies face scarcity of resources. Resources could be in terms of labour, land, capital or management.

So what happens from here? Resources can be used for many different things but because of the limit of the resource that people have to make choices to satisfy some of their wants. From here people have to make choices due to the scarcity of resources. This creates opportunity cost, which is a measure of what you could have gotten from your next best alternative if you had chosen that alternative. What ever choice you made there is an opportunity cost.

Scarcity and opportunity cost are always interlink. It is because of scarcity of resources that people have to make choices between the goods that they want. The choices that they make will always produce and opportunity cost as the money could have been used for another good.

Scarcity and opportunity cost happens in everyday life. I remember that one time when I was deciding on which computer game I should get. When I found two games that I liked, both costing $50. In my wallet I only have $60 which is not enough to buy two games since the combination of those two games would cost $100. Therefore I had to decide on which game I had to forgo since my resource (the money I had) is scarce. So I decided to pick the game that I really wanted to play. This would create an opportunity cost, which would be the money that i could have used to buy the other game.

Countries also face scarcity of resources and would have always make choices, which would create an opportunity cost. One major scarce resource that Singapore faces is land. On the map Singapore is only a very tiny dot , thus already proves that Singapore is does not have a lot of land and comparison to other countries all over the world.

Initially when Singapore was developing, land was used to build factories to industrialise the country. However as Singapore develops, they need to use the land for other purposes that will raise the productivity level and overall GDP in the country by having more revenue generating industries such as banking, finances and IT. However with the shortage of land, Singapore is unable to build more factories and high-rise buildings to house the revenue generating industries, thus Singapore forgos building factories to build more high-rise buildings, making the land that would have been used to build factories the opportunity cost.

Countries, companies and people all face scarcity of resources. Due to the scarcity of resources, choices have to be made which in turn creates opportunity cost. Whatever choice that someone makes there will always be consequences. To sum it up, scarcity and opportunity cost are interlink as scarcity will always create opportunity cost due to choices.

Yeo Ee Jie 5X

Introduction To Economics And Rationing Systems

Economics is a social science that studies human behavior. Economics has a unique method for analyzing and predicting individual behavior as well as the effects of institutions such as firms and governments, or clubs and religions.Economics is defined as a study of mankind in the ordinary business of life. It examines that part of individual & social action which is most closely connected with the attainment & with the use of material requisites.

The principle of scarcity states that we are more easily persuaded when the resource is limited.For example,if you have one job interview, then the scarcity of interviews makes you highly value this one interview. This puts extreme pressure on you to get that job and is likely to cause you to perform poorly in the interview. On the other hand, if you have many job interviews(many choices available), you place less emphasis on each interview as each one is not very scarce. The interviews possess less value which allow you to relax, perform better, and increase the chances of you landing a job.

Scarcity necessitates trade-offs,and trade-offs result in an opportunity cost.While the cost of a good or service often is thought of in monetary terms,the opportunity cost of a decision is based on what must be given up(the next best alternative)as a result of the decision.Any decision that involves a choice between two or more options has an opportunity cost.


A Production Possibility Curve(PPC) is a graph that shows the different rates of production of two goods that an individual or group can efficiently produce with limited productive resources. The PPC shows the maximum obtainable amount of one commodity for any given amount of another commodity or composite of all other commodities, given the society's technology and the amount of factors of production. Imagine an economy that can produce only wine(product A) and cotton(product B). According to the PPC, points A, B and C - all appearing on the curve - represent the most efficient use of resources by the economy. Point X represents an inefficient use of resources, while point Y represents the goals that the economy cannot attain with its present levels of resources.

As we can see, in order for this economy to produce more wine, it must give up some of the resources it uses to produce cotton (point A). If the economy starts producing more cotton (represented by points B and C), it would have to divert resources from making wine and, consequently, it will produce less wine than it is producing at point A. As the chart shows, by moving production from point A to B, the economy must decrease wine production by a small amount in comparison to the increase in cotton output. However, if the economy moves from point B to C, wine output will be significantly reduced while the increase in cotton will be quite small. Keep in mind that A, B, and C all represent the most efficient allocation of resources for the economy; the nation must decide how to achieve the PPC and which combination to use. If more wine is in demand, the cost of increasing its output is proportional to the cost of decreasing cotton production. Point X means that the country's resources are not being used efficiently or, more specifically, that the country is not producing enough cotton or wine given the potential of its resources. Point Y, as we mentioned above, represents an output level that is currently unreachable by this economy. However, if there was a change in technology while the level of land, labor and capital remained the same, the time required to pick cotton and grapes would be reduced. Output would increase, and the PPC would be pushed outwards. A new curve, on which Y would appear, would represent the new efficient allocation of resources.

Points along the curve describe the trade-off between the two goods, that is,the opportunity cost.Opportunity cost here measures how much an additional unit of one good costs in units forgone of the other good. The curve illustrates that increasing production of one good reduces maximum production of the other good as resources are transferred away from the other good.


In economics, utility is a measure of the relative satisfaction from, or desirability of, consumption of various goods and services. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility.The two basic ways of measuring utility are total utility and marginal utility.Total utility is the total satisfaction gained from consuming a certain quantity of a product while marginal utility is the extra utility gained from consuming one more unit of a product.


Economics is also a study of rationing systems.Since the resources in an economy are relatively scarce,there must be some way of rationing those resources and the good and services that are produced by them.There are two main rationing systems,i.e,planned economies and free market economies.

A planned economy or directed economy is an economic system in which the government or workers' councils manages the economy.It is an economic system in which the central government makes all decisions on the production and consumption of goods and services.Its most extensive form is referred to as a command economy,centrally planned economy, or command and control economy. In such economies, central economic planning by the state or government is so extensive that it controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income.The planners decide what should be produced and direct enterprises to produce those goods. A free market economy is a market economy based on supply and demand with little or no government control. A completely free market is an idealized form of a market economy where buyers and sells are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation. In financial markets, free market stocks are securities that are widely traded and whose prices are not affected by availability. In foreign-exchange markets, it is a market where exchange rates are not pegged (by government) and thus rise and fall freely though supply and demand for currency.



Some countries,which were predominantly centrally planned, such as Cambodia,China and Laos have been moving towards transition economies.A transition economy or transitional economy is an economy which is changing from a centrally planned economy to a free market.Transition process is usually characterised by the changing and creating of institutions, particularly private enterprises; changes in the role of the state, thereby, the creation of fundamentally different governmental institutions and the promotion of private-owned enterprises, markets and independent financial institutions.



Economic growth is the increase in the amount of the goods and services produced by an economy over time.It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," which is caused by growth in aggregate demand or observed output.Economic growth is actual growth,a movement from a point inside the production possibility curve to a point that is nearer to the curve.



Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants. It is the process by which a nation improves the economic, political, and social well being of its people.It is usual to measure economic development in terms of education indicators,health indicators and social indicators.

Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but in the indefinite future. Sustainable development ties together concern for the carrying capacity of natural systems with the social challenges facing humanity.

Munisha Kumra
5X

Alfred Marshall, a dominant British economist, defined economics as ‘the study of mankind in the ordinary business of life’. This was the project of the many economists such as Adam Smith and Milton Friedman. They tried to comprehend people’s actions and the repercussion of their actions for the society at large. Personally, my definition of economics varies from that of Marshall. It comes from an online article which I happen to come across during my research. It states economics is the study of how to get the most out of life. I favour this definition as I feel it strikes at the heart of economics which are the choices that we make, given that we do not get everything that we want. Economics is the study of unlimited needs and restricted measures, the study of constrained choices. This is true for individuals and societies. In every society, there is a problem. This problem is known as scarcity.

Scarcity is the problem of infinite human wants and needs, in a world of finite resources. In other words, society does not have sufficient productive resources to fulfil those wants and needs. Scarcity limits us both individuals and as society. As individuals, limited income keeps us from doing and having what we might like. As society, limited resources such as manpower, machinery and natural resources, fix a maximum on the amount of goods and services that can be produced. Therefore, scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Like Thomas Sowell said ‘it is best: no solutions, only tradeoffs. To get the most out of life, to think like an economist, you have to know what you’re giving up in order to get something else.’ This is known as opportunity cost.

Opportunity cost is defined as the next best alternative forgone when an economic decision is made. In today’s world, every choice we make has a price. But the question is, are these choices wise and reasonable? How are these choices going to benefit us? Today in an extremely materialistic world, people seem to give up a lot to get something they want so that they can fit in into society. A teenage girl and boy would give up an entire monthly allowance so he or she can get their latest Xbox or the latest Louis Vuitton bag. The opportunity cost of their actions is the other ways in which they could have spent their money on wisely and usefully. The girl and boy could have saved an entire monthly allowance so he or she can buy books related to their studies. This would be a wise choice as it a lifelong investment as knowledge retrieved from books is priceless. But however, no one seems to be interested in wise investments in terms of their choices. Money is critically valuable, and we are giving up more than we know if we keep spending it unnecessarily.

In my opinion, understanding the concepts of economics is greatly vital for our lives. Many of us have a misperception about economics. All that comes to our minds when we think about economics is stock markets which are not what economics is about. We should not be naive about economics as after all it determines the choices and the decisions that we make, helps us to understand how the world works and also fulfil the needs and wants of humans.
- Geetha 5W

Intro to Econs

First of all what is economics? Economics is a social science which studies human behaviours and how people choose to allocate their resources. Secondly what is the main problem in every society? Scarcity is the main problem in absolutely every single society. The fact the recourses are limited is the cause of scarcity. For example Singapore is scarce in almost everything. Except human recourses. That’s why most of Singapore’s goods are imported and that’s why education is fundamental in Singapore’s growth as education improves the quality of Singapore’s human recourses. The next thing is choice. Everyone has limited financial resources therefore people need to make choices between alternatives. This leads to opportunity cost which is the next best alternative foregone when a decision or choice is made, if I chose to buy a bag for $120 with this choice I made I could have used that $120 to purchase a pair of shoes, then the opportunity cost would be the shoe.

The next fundamental part of economics is the three main questions.

1. What to produce?
2. How to produce?
3. What to produce?

Since resources are scarce these decisions can be made by the influence of the demand and supply curve of the free market or from a planned economy where the government chooses what to produce, how to produce and for whom to produce for.

With the end of communism in 1991 following the collapse of Soviet Union, the economies of the former Soviet satellites moved towards free market. By then, China has already been experiencing tremendous economic growth and development for a decade. Would these former Soviet satellite states follow China’s path to wealth? What were the transitional problems faced by China then in the 1980s?

One problem experienced by China during her transition to free market was the problem of structural imbalance. Non-state enterprises in China were more productive than State Owned Enterprises (SOEs). One reason was that the non-state enterprises had to be competitive in order to survive. The workers in these enterprises had to be productive; otherwise, they would be fired, unlike the employees in the SOEs. Thus, non-state enterprises exerted a pressure on the SOEs. This led to reforms such as tax reforms, establishment of contract responsibility, and introduction of modern corporate system in the SOEs. The SOEs also became more competitive and productive in the long term.

The price mechanism became the main tool for allocation of resources. The development of private enterprises rectifies the misallocation of resources. They had to pay market prices for their inputs; their products were sold at market prices. This induced the non-private owned enterprises to adopt more labour-intensive technology and to concentrate on labour-intensive small industries as there was abundant cheap labour. This also led to the migration of rural workers to the cities in search of jobs in the factories. This was to result in a widening income gap between the rural and urban regions. The educated and skilled workers tended to earn more than their less educated and unskilled counterparts. Thus, whilst the big coastal cities were experiencing rapid economic growth, the rural areas were stymied in poverty. However, this does not mean that there was an absence of poverty in the urban areas. Indeed, the urban areas were also full of poverty. Hence, the Chinese government had to fight poverty on two fronts.

In my opinion, knowing the concepts of economics is a fundamental basic which is needed in our daily lives. It helps us make decisions whether big or small. A concept like opportunity cost helps us make clearer decisions on what to purchase. Economics also helps us to understand better how the world works around us.

Nicholas Ang
5W

Economics: The answers to everyday enigmas

Economics is everywhere, not only in banks or classrooms. it influences greatly to what we do and what we see, from your home to the streets. Economics explains some of the life's most intriguing questions. For example, in some countries, there are drive-up cash points so people do not have to get off their cars in order to withdraw some extra cash. But why do the keypad buttons on these machines have braille dots on them? The visitor of these machines are almost always drivers, and of course, none of whom are blind. The thing is, the cash point manufacturers have to make keypads with Braille dots for their walk-up machines anyway. So it is cheaper to make all machines the same way. Since the Braille dots caused no trouble for the sighted or the non-sighted users, the extra expense do not justify.

In economics, we stufy the conflickt between the limited resources int he world, and the unlimited wants and needs people have. Which then of course, due to the conflict, result in scarcity. In economics term, scarcity refers to the inefficient supply of a certain product to satisfy the human wants and needs. To put this in an example of our everyday life, we can relate this concept to our number one everyday necessity, food. Some fruits and vegetables are scare in markets sometimes because those fruits or vegetables grow only at certain times of the year. Because the supple of fruits and vegetable is lower, there is a better chance that those fruits and vegetables will be scarce, or not always avaliable. You may find that the market has no strawberries at all. Why? Either no shipemtns of strawberries came in, or so few strawberries came in that by the time you got there, they were all gone.

Of course, when there's scarcity, we have to make choices. Following the example above, when strawberries are scarce, then we have to make a decision whether or not to travel to different places to get strawberries, or go without them. but when you can't find the strawberries, we can say that scarcity has forced you to go without strawberries. Choice is another important econimic concept. People have to make choices because they do not have infinate income. So with the limited money they have, they have to choose what they are going to use the money on. The choice is small if a person's financial income is small, compared to someone with a larger income, who has more choices.

This leads us to anoyher important concept in economics, oppotunity cost. Which is, defined as the next best alternative forgone. When we say doing something is an opportunity cost of another thing, it means that one has to give up something, a choice, to pursure another thing. A simple example would be the use of land. When a piece of land is used to build a shopping mall, the opportunity cost would be the other uses of the piece of land. The land could be used to build more houses or high rise buildings, which could then give people a place to live if the country is over-populated. But because a choice to pursue for a shopping centre is made, the land cannot be used to build houses.

Opportuanity cost is important simple because it helps us explain a host of interesting behavior patterns. for example, the widely remarked culture difference we notice in big cities like London and a smaller town in England. Why do residents in cities so rude and impatient, but residents of the small town so friendly and courteous? If you walked into both places and asked for directions in a small town, people would tend to stop and help you and guide you. On the other hand, people in the large cities wouldn't even bother making eye-contact with you. Why is this so? It is because places like London has a high wage rate and have a lot of things to do, therefore, the opportunity cost of people's time is very high. So perhaps this is the reason why people in the city are a little quicker to show their impatience.

Economics does not only help us into knowing the problems faced by the world, like scarcity. It also helps us to explain why certain things in the world happen, and why people choose certain things and act in dfferent behaviors. And these behaviors are shown in the link between scarcity, choice and opportunity cost.

-Nicholas Hui T.W 5 Z