Introduction To Economics

Economics theories are used almost everytime in our life since it is the study of how to manage our scarce resources. So what is an Economy? Economy is the area in which people make, or produce, goods and services. Economics is divided into two parts which is microeconomy which includes the role of government, producers, demand and supply, markets, etc and macroeconomy which includes inflation, growth, unemployment, etc. In this short post, I will cover some of the basics of economy which includes Scarcity, Opportunity cost, free market and planned economy.

Economics have one main problem which is scarcity. Economic scarcity is the concept that there is only so much of anything. It is economic scarcity that gives rise to society's attempts to assign value to whatever is limited. Ask yourself a few simple questions: Would you like more clothes? would you like more money to buy more goods and services? For most people, the answer to these question is yes. People always want more, no matter how much you already have. This shows how human wants are unlimited. We contrast this to the limited resources we have to satisfy this wants. Only a limited number of resources can be used to satisfy these wants, since we only have this much natural or human resources. Hence, scarcity is clear that it is caused by the unlimited amount of wants but yet the resources that is used to satisfy these wants are limited.

From the above economic problems, comes about choice and opportunity cost. Since there is a limited resources and human wants are unlimited, choice is very important for people since they have to choose which wants they want to satisfy. Choice is necessary because resources can be used to produce other goods and services. From this, opportunity cost apply. Opportunity cost is the next best alternative foregone, it is the key concept in economics because it implies on the choice between two desireable results. It also plays a big part as it make sure that the limited resources are used efficiently. For example, if a city wants to build a school on an empty land, the opportunity couse will be the funds in building the school and the land itself to build other buildings. But opportunity cost also apply in terms of anything that has value.

Next, a producer have three very important question before they create goods and services to satisfy people's wants. 1.What to produce?, one problem is deciding exactly what goods and services to make since there is limited resources. This involves choosing which wants to satisfy. 2.Whom to produce for?, not every person's wants can be satisfied due to limited resources. 3.How to produce? These answers depends on the type of economy the producers are doing. If it is a planned economy, The government decides what, how and for whom to produce since they are the ones who controls the economy. If it is a Market economy, the people decide what, how, and for whom to produce. If the demand for a certain product is high, producers will know how to tackle the three questions and obtain a profit.

These are a few basic things about economy. Although they are basic concepts, it haves a very important aspects towards economy. Every economy faces the same problems, which is economic scarcity. But here comes a choice and opportunity cost to efficiently use this limited resources. From here producers, will need to choose how to satisfy these people's wants either from market economy or planned economy.

Desmond Kandiawan :D
5y

What do we need to know about economics ?

Economics is known a social science,which is a study of people in society and how they interact with each other.In economics we have to know how scarce resources are allocated while human needs and wants are infinite.Moreover,the study of economics involves a lot of complicated tables,charts,analyzing articles...But for this following blog posting,i will cover some basic concept of economics including the defination of scarcity,choices,opportunity cost,factors of production.

Firstly,let's start with scarcity.Everyday,we can see the news on newspapers,internet or telivision about the status of natural resources nowadays.Natural resources are being used up at an unbelivable pace.Tons of oil,ore...are mined daily,as well as millions of tree are being cut down to produce numerous kinds of goods and services for people.Althought we know that someday we have to face the scene that none of those resources would exist on the Earth,but humans needs and wants are still constantly unlimitted.

Move on to choices,due to the scarcity and the unlimitted humans wants,it means that we can not have whatever we want.That's the reason why choices appear in economics..For example i just have a limitted amount of income,whenever i purchase goods and services,i have to consider and think about it for a while and make a choice for myself.

The opportunity cost is related to the scarcity.As i said above,we can not have whatever we want and we have to make a choice.However,before we make a decision,we always implicitly compare the costs and the benifits of our choices.What will we receive from that choice?Hence,we have the definition of opp.cost.According to the textbook,opp.cost is the next best alternative foregone when an economic decision is made.To simplify,opp.cost means whatever must be given to obtain something.For instance, if I choose to buy one DVD as opposed to two video tapes, I must give up owning a second movie of inferior technology in exchange for the higher quality of the one DVD.Furthermore,the opp.cost is only applicable for "economic good",it means goods are made of scare resources.Those "free good" such as oxygen,water do not have an opp.cost.

Finally,we go to factors of production.In every economy,whether it's a planned economy or free market,they must have these four types of factors of productions:Land,Labour,Capital and Entrepreneur.These factors of productions are resources that are used to produce goods and services to satisfy human wants.I will briefly define those four factors.In economics,land includes not only the surface area on which the company builds building,factories,but also the natural resources in the land.Labour refers to any human effort used in the production of goods and services for which payment is made.And Capital is the part of wealth that has been made by man for the production of further wealth.Lastly,Entrepreneur is the one who take risks to organise the 3 other factors for the production of a good and service so as to be rewarded by profits.Applying in my father's business,which is electric cable,the land is ares that he sets up the offices and the factory.Unfortunately,there isnt any natural resources there can be used.The labour are those workers,officers of the company.The Capital is all the machinery,raw materials such as copper,aluminium...and the entrepreneur is my father.
Pham Duy Vu - 5Y

Intro to econs

Many websites and books often define economics as a social science that studies the production, distribution, and consumption of goods and services although I feel there is no universally accepted definition. The following blog posting will cover some of the key concepts in an introduction to the subject of economics, some of these concepts are scarcity, choice, opportunity cost and the distinguishing features between a planned economy and a free market economy.

The first concept is scarcity. The problem of scarcity is that people have an infinite want or desire for resources which are limited on this planet. There are only a limited amount of workers, machines, factories, land area and reserves of oil on the planet earth, but people are always looking for better food, housing, transport and health services. There is a limited amount of money available to various governments and they have to prioritize as to how they can spend their money. For example governments cannot raise taxes too much to fund health and education without affecting other areas of the economy. If something is scarce, it will have an existing value. If the market supply of a good is low, the price will rise providing there is demand for it. Goods that are not scarce will have a lower market value.

The concept of choice is related to scarcity. Everyone has a limited income, and therefore they have to make choices when buying a particular good or service. They have to decide how to properly spend on their financial resources, they now have to choose proper alternatives, and this is linked to opportunity cost. Opportunity cost is defined as the next best alternative given up. Opportunity cost is the basic relationship between scarcity and choice. For example, if a city decides to build a stadium on a piece of vacant land that it owns, the opportunity cost would be the value of benefits that could have been attained by creating something else such as a hospital or the city could have sold the land to reduce the city’s debt. Opportunity cost does have it’s exceptions, air for example is not limited in terms of supply, therefore it does not have an opportunity cost when it is used. These are “free goods” and cannot be scarce and will not have a price.

A planned economy is an economic system in which the government completely 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. A free market economy on the other hand is seen as capitalism, prices will be used instead to ration goods and services. Production is left in private enterprises and demand and supply are used to set the incomes and prices in that particular economy

In free market economies, the industries will find the most efficient method of production so as to maximize their benefits in terms of profits. These industries completely concentrate on making profits. Therefore it is an economy where demand and supply is controlled by the producers and consumers of the economy. it is also where the price mechanism corrects itself (invisible hand)

In planned economies on the other hand, the government will set the production targets. However these targets are not always met as workers lack the incentive and motivation to do their job efficiently. Because of human nature it is difficult for an individual to put the needs of an entire country before himself. One example of this was in the USSR, the workers were offered attractive incentives if they managed to reach their production targets. Therefore planned economy is when the goods and services that are produced are determined solely by the government.

Nathanael Tan

5Z

The Presidential Opportunity Cost

When a choice is made, something must be left out. The Opportunity cost is what you give up so you can gain another. This does not necessarily mean that money must be involved. A very recent dilemma that comes under the topic of opportunity cost is the Presidential Democratic Party elections last year between Hilary Clinton and Barack Obama. When Barack Obama was elected Hilary Clinton was the opportunity cost, along with most of her plans for their country. Although in my opinion Obama was definitely the right choice, one must understand what one has lost as well as gained at the same time.

Taxes are colossolly important when it comes to the world of politics and economics. Senator Obama's plan of the 'trillion dollar tax increase' shocked the entire nation but once he explained it, it made sense. His plan was to collect $1 trillion over the next 10 years and later use this money to improve the country by backing his other popular plans like doing all he can to minimize the impact on global warming. Obama wants to tax 6% of America's population, the upper-class, who make more than $97,000 a year. This is far from the middle class and because the middle class is the bigger percentage of people, Obama got the vote. Hilary Clinton said that his plan was ridiculous and many were lead to believe that Obama's plan would affect "firefighters.. and school supervisers" as Senator Clinton said she supported them. However, this is untrue as even the most elite firefighters would earn at the most $86,518 a year thus missing obama's mark by $10,000. On the other hand, Hiliary Clinton's economic tax plan was quite good on its own. Obama's tax plan might not cure the econimic crisis we are currently in. Hilary Clinton's would have been a better choice in this sense as it had a higer percentage of curing the crisis. Thus the opportunity cost.

Health care was a major issue during Senators Clinton and Obama's election. Hilary Clinton claimed that her new plan for America's health care system would be able to insure "everyone" local to America. She attacked Obama's health care plan by stating that his plan would leave 15 million Americans un-insured. This is about 6% of the population. Obama called his system the "universal" health care. He wants to tax the upper-classmen who can afford to pay a little more in order to improve the country's hospitals, similar to the tax plan. However according to some specialists, Obama's plan of 'generous subsidies' would soon lead to 82% of the currently un-insured to be insured for health. Also, if individual mandates were included in Obama's plan 100% of all the uninsured would be insured a few years after Obama wins the Presidential Election of 2009 (which he did). Hilary Clinton's plan would only leave out 1 million ++ people uninsured. This, compared to Obama's plan, would be a better choice. But, because of the possibility of individual mandates being included into Obama's plan the majority of the people rooted for Obama's health care system. In this case, the opportunity cost was Hilary Clinton's health care system plan.

Although plans for America's future is a top priority, the reason that this particular election attracted so much attention was because Hilary Clinton is a woman and Barack Obama is an African American. Either way, it would be the first time in American history that a woman or an african american would run for President. For woman's rights activists it would be a giant leap forward to have a female president as that would be hard core evidence of how much the female gender has risen to positions of power all over the world, not just America. As one of the biggest super power in the world, America's giant leaps affect the rest. When Obama became President, this also showed that the rascism in America definitely turned down although it by no means means that rascism will ever disappear. Groups like the Ku Klux Klan were definitely shocked but it does not mean that they will magically dissolve into the air. Still, the elections vaguely divided people into two different groups; those who wanted a woman president and those who wanted a black president. The Politics was just an add on as both candidates were equally powerful.

Opportunity costs can shape the entire world, especially a choice that is of a big a scale as the democratic party elections. In the end Hilary Clinton was the opportunity cost thus including her tax policies and her health care system. Barack Obama is now President and will soon show the world whether the cost of Hilary Clinton was worth it.
fukumi orikasa, 5v

Sugar production fell in India: Scarcity / Opportunity cost / Supply

Tuesday, 17 February 09

Scarcity is a situation in which resources are finite and limited, while human resoucres are infinite and unlimited. Humans want many things, but because resources are scarce, not all of our wants and needs will be able to be met.

Lately, India has experienced a fall in the country's sugar production. It is known to be one of the countries in the world that produces a high amount of sugar, and is said to be importing sugar from other countries for the first time in three years. Once producing a lot of sugar, India now has to rely on importing sugar from other countries instead of producing the sugar itself in this season of a fall in its sugar production. I quote from the below:

Kanhaiyalal Gidwani said that “sugar production in the country is going to be 40 per cent less compared to last year. Many sugar mills have stopped operations due to shortage of sugarcane”, and that "The annual sugar production for the year is likely to be 200 lakh tonnes while the consumption is 230 lakh tonnes and most of the buffer stock is already in the market".

Here, the concept of scarcity has been illustrated because there is a shortage of sugarcane. This means that sugarcane is scarce and there will not be enough of it to produce enough sugar to meet consumers' wants and needs.

But why then has there been a shortage of sugarcane?

There are some possibly reasons that could lead to a shortage of sugarcane.

Firstly, it is because of the weather. I quote from Anis Majeed, President of Wholesaler Grocery group below:

"The main reason behind this shortfall is a smaller sugarcane crop due to untimely rains".

Since there was "untimely rains", this could possibly make it too wet to grow sugar canes. Thus farmers could have been unable to grow sugarcane even if they want too. With less sugarcane planted and grown, there would be less sugarcanes to produce sugar, and thus India would experience a fall in the production of sugar.

Here, i would like to bring in the concept of supply. Supply is the willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period. Assuming that it is ceteris paribus, whic means all other things being equal, supply can be influenced by various factors, such as weather, cost of production and the influence of modern technology.

In this case, the supply of the sugarcane has been affected by the weather. Because there have been untimely rains, conditions are not as suitable as before to grow sugarcanes. This is a fall in the supply of the sugarcanes, which will cause the supply of sugar, or the production of sugar to fall.

IFDC, the international centre for soil fertility and agricultural development reports that urea, the most common nitrogen fertilizer, has risen in price from an average of US $281 per ton in January 2007 to $402 in January 2008, and to $815 in August.

Also, fertilizers are a basic ingredient in producing healthy crops! If farmers do not buy the fertilizers they will not be able to produce good, strong and healthy crops. As the prices of fertilizers increased from January 2007 to August 2008 as mentioned above, this will discourage farmers to buy fertilizers as they want to avoid high prices. When farmers do not buy fertilizers they cannot grow crops properly, and this will lead to less crops grown.

This could be another possible reason as to why there is a shortage of sugarcanes.

So in conclusion, resources could be scarce because of certain reasons. My post has talked about the weather conditions, and the prices of goods used to produce the good, for instance, how the rainy season was less suitable to grow the sugarcane crops, and how the increase in the prices of fertilizers could possibly cause a shortage of sugarcanes.

Resources are scarce and limited and this can have quite some influence on the supply of the product, in this case, how the shortage of sugarcane has quite some influence on the production of sugar.

Here, i would like to conclude by bringing in the concept of opportunity cost. Opportunity cost is defined as the next best alternative foregone when an economic decision is made. For example, in this case of the fall in sugar production in India, if farmers buy less fertilizers because of the increase in the price of fertilizers, they can use the money for some other purpose. However, this also means that less sugarcane crops can be grown and produced, which would also cause a shortage of sugarcane crops. The opportunity cost would then be buying the fertilizers, growing healthy sugarcane crops, producing and selling sugar and earning money through producing and selling sugar.


sources:

1. http://www.bloomberg.com/apps/news?pid=20601091&sid=aEm2g82hUqzw&refer=india

2. http://www.expressindia.com/latest-news/rising-sugar-price-leader-urges-centre-to-step-in/405518/

3. http://www.moneycontrol.com/commodity/comm_news.php?autono=3347&type=SPR

4. http://www.ifdc.org/focusonfertlizer7.html



Alisa
5y

The Great Marking Scheme Debate

As students, we sometimes argue that it is not really justified to have marks deducted because we have answered a certain question incorrectly. And now as an economics student, learning the economic concept of opportunity cost, scarcity and choice i think my point is further enhanced to be true.

When we attempt a certain assignment, test or exam sometimes marks are deducted for answers that are incorrect or irrelevant. In Singapore, I realize that perhaps this practice is not used as much however when a certain wrong point is made in the answer then the question is given less marks or marked completely wrong with the Singapore system. I am also previously from the United States, and have seen and experienced their system and what they do is marks are deducted for wrong answers so it is almost better to leave the ones you are unsure about blank like the major university entrance exam, the SAT. But why? Why is this needed?


What it should be is that no marks should be deducted if wrong points, irrelevant points or no points are made at all because only opportunity cost is incured. Opportunity Cost is defined as the next best alternative when an economic decision is made. An economic decision in this case is how to use our time allocated for a paper and with the basic economic problem that resources are relatively scarce but wants are infinite, the scarce resource that is now considered is TIME. Time is scarce and therefore a choice has to be made and with choice as to how to use that amount of time we are given there will be a conflict of interest as we are unable to satisfy all our wants so there is opportunity cost.

Therefore an example would be that if we have a question, and to achieve the maximums marks for the question, 3 to 4 points should be given, and the student has a paragraph that provides and explains a wrong point then the opportunity cost is that the student could have used that time to add another point that might be correct or used to thoroughly check the answer over again. Therefore, the student has incurred a loss and would probably not get the maximum marks because not enough points are given if the whole paragraph of irrelevant information is ignored and no marks is deducted because it is placed over there. The mark in this case is deducted because not enough points are made and not because there is a wrong or irrelevant point in the answers. The incorrect point is ignored in this case and is an option the system should consider.

Now, to show the concepts of scarcity, choice and opportunity cost, among other things, we have the production possibility curve. They show the maximum combinations 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. The 2 axis would hold the 2 scarce resources, in this case the x-axis would have the time used to write that irrelevant and wrong point and the y-axis would hold the time that could have been used to give another additional point that may be correct. The PPC is always a curve because resources are never homogenous but for ease of constructing sometimes lines are used.

As the point moves towards the y axis on the curve, more time is spent on adding the additional point instead of writing that wrong and irrelevant point and vise versa as it moves towards the x-axis. The point is also never really on the curve. In reality it is inside the curve as resources are never fully efficient and in this context resources would be that we are never fully on our game in that given time period. We might have had a late night and our mind would not be able to think as quickly or efficiently. If the point moves outwards towards Y1 and X1 it means that more resources is allocated and in this context it means more time is allocated or more help is given to us.

Though it can also be argued that with a wrong point being made the whole answer would give a wrong impression on the real answer of the question or that it spoils the whole structure of how that question should be answered. All this again points to opportunity cost being incurred and deducting marks is not necessarily necessary. When i went over to my economics teacher to ask whether i should cancel out a wrong point i made, the teacher said there is no need because that is opportunity cost incurred and i could have used that time to add another point and marks will not be deducted because i have put in that incorrect point.

Hopefully, many other subject papers would follow suit and this option considered by the system where marks should not be deducted or be marked completely wrong because we, the students, have incurred opportunity cost and it should only be deducted because not enough points are made and that wrong or irrelevant point should not be considered. In another case, if we give more then what is required and with the one wrong point being ignored then enough points is still given and marks should be given accordingly to how correct the rest of the points are and if they reach the maximum level, maximum marks should be given. Therefore this shows the basic economic problem and opportunity cost we face in a very domestic context of our everyday lives and our time everyday used for different causes and in this case, time to answer a question.



Amanda Ong 5Z

Introduction to economics

What's economics? Many say that economics is the study of how the forces of demand and supply allocate scarce resources, which is divided into two parts, microeconomics, which examines the behavior of firms, consumers and the role of the government; and macroeconomics, which looks at inflation, unemployment, industrial production and the role of the government. But, in my opinion, economics is about what everyone knows, but in a language that nobody understands.

The basic problem of economics is that there are scarce resources and humans have unlimited wants. This brings about choice and opportunity cost. Where opportunity cost is the next best alternative lost because of a choice made. For example, I once wanted to buy a comic and a computer game, and they cost $15 and $27 respectively and i only had $30. At this point, i was faced with choice because i could not choose both as I did not have enough money to buy both, and I chose to buy the computer game. After choosing the computer game, I have thus experienced opportunity cost, because I have lost the next best alternative, which is the comic, after choosing the computer game. This example also illustrates scarcity, because I only have $30, and as both add up to more than $30, I cannot get both the computer game and the comic.

There are also three questions that producers are always faced with; For whom to produce? What to produce? How to produce? Producers will always ask who they should produce for, it could be the higher upper class of the society or the youngsters in the society. Cars like Ferrari are examples of goods produced, that are targeting the upper class of society, while brands like Bilabong cater to the youngsters in the society. Next, producers ask what to produce, based upon who they intend to produce for, like the example illustrated above. Finally, producers ask how to produce. This question is subjective to which type of economy the producer is in, whether it is a free market or a command economy.

In a free market economy, producers will find the most efficient, cost saving method possible, so as to maximize their profits. This is because in a free market economy, the producers are profit motivated, and because of all the competition they face, they will need to produce goods of superior quality compared to their competitors. An example is the ipod versus creative. When creative came out, ipod had to come out with a new model in order to compete with creative, because a new model would cause an increase in demand for it.

While in a planned economy, the producers are not the ones who set their targets, but the government tells them how much to produce within a year. A good example of this is Russia, where producers produced 3 litre jars of mustard just to meet the requirements set by the government. But, a lot of the mustard went to waste because people could not finish all the mustard and also because the mustard went bad before people could finish eating them.

This also shows the efficiency between the free market and planned economy. While the free market is efficient in allocating resources and in production, because of profit motivation and competition, the planned economy has proved itself to be inefficient because they do not think of methods of production that is efficient and cost saving, but rather, they think of ways to meet their yearly targets.

Therefore, in every economy, whether they are planned or not, they need to answer the three economic questions and they all face the same economic problem of scarcity and choice, but they do not always tackle the problem the same way.

Timothy Tan Wen Bin 5V