StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

The Concept of Scarcity in Macroeconomics - Assignment Example

Cite this document
Summary
The paper "The Concept of Scarcity in Macroeconomics" discusses that the GDP deflator is used to measure the tracks of all new products that are produced domestically and represents the total worth of products produced in an economy in a specific period. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.6% of users find it useful
The Concept of Scarcity in Macroeconomics
Read Text Preview

Extract of sample "The Concept of Scarcity in Macroeconomics"

Increasing demand for goods and services and limited resources makes the phenomenon f scarcity necessary in the study of economics. Economics implies that people will have unlimited wants and needs and due to the scarcity of resources, people are forced to choose the needs to satisfy first since resources are limited. Therefore, scarcity will limit individuals based on limited income, manpower, and natural resources, and this puts a limit on the amount of products people have at their disposal.

An economy’s income must be equal to its spending to ensure that there is a favorable balance of payments in the economy. For every buyer of a product, there must be a seller, and this means that GDP, which is utilized in measuring the levels of expenditure and incomes must be equal. If the expenditures are more than the incomes, there is an unfavorable balance of payments, and this implies that the economy is falling apart.

The GDP deflator will measure the ratio of the current price of GDP to the real GDP and will show how much the change in GDP from the specific year relies on the changes in the prices of products. The consumer price index (CPI) is used to study the total output of the economy, and it is a cost of living indicator that measures the total cost of products purchased by consumers in a country. It helps in determining the purchasing power currency has and compares this to past years to see determine the status of the economy.

Higher savings lead to higher standards of living because savings are the chief source of capital, which is to some extent the backbone of an economy. Savings will refer to accumulated funds, and this implies that an entrepreneur can use these funds to invest in the future. For example, when starting up a new venture, an entrepreneur will either use their savings or borrow from various institutions to fund the start-up. If people could consume everything and not save, it implies that there will be no funds to be used in the future if an investment opportunity comes up. Moreover, when an individual takes a portion of the savings to reinvest or boost his or her business it is seen as a means of utilizing savings. Therefore, savings will lead to higher standards of living because they can be used on a later date to invest in a viable opportunity, which will produce profits hence improving the living standards of the individual, business,s or economy involved. More savings will mean a greater pool of capital is available to produce more products, hence this improves living standards. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Macro Econ Assignment Example | Topics and Well Written Essays - 500 words”, n.d.)
Macro Econ Assignment Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/macro-microeconomics/1603385-macro-econ
(Macro Econ Assignment Example | Topics and Well Written Essays - 500 Words)
Macro Econ Assignment Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/macro-microeconomics/1603385-macro-econ.
“Macro Econ Assignment Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/macro-microeconomics/1603385-macro-econ.
  • Cited: 0 times

CHECK THESE SAMPLES OF The Concept of Scarcity in Macroeconomics

Introduction to Microeconomics

It occurs due to scarcity.... his concepts is known as the basic economic problem which occurs due to scarcity.... Due to scarcity individuals have to make a choice.... Debarati Bose(2011), How much does oil scarcity alter consumer's choice of a vehicle?... Every concept was studies from the best possible source including books and electronic sources.... Furthermore authorized academic websites were consulted for various concept analysis and diagrams for concept illustrations....
4 Pages (1000 words) Essay

World Economy: Neoliberalism

Therefore economics tackles the concept of scarcity.... Before going on to the concept of neoliberalism, a brief discussion on basic economics would help in the understanding.... the concept of cost is usually the “monetary measure of the resources sacrificed or forgone to achieve a specific objective, such as acquiring a good or service,” (Drury 2008, p.... For the sake of economics, the study limits the concept of cost in terms of money....
6 Pages (1500 words) Essay

What is Economics Issues Affecting The Economy As A Whole

(McConnell, 2011) macroeconomics and Microeconomics Before we go into further analysis it is very important to discuss about the two major branches of economics and that is differentiating between Microeconomics and macroeconomics.... macroeconomics avoids this distinction among many different kinds of goods, firms and markets that exist in the economy and instead focus on aggregate.... (McConnell, 2011) Issues affecting the economy as a whole Studying about the structure of the economy is a part of macroeconomics that studies the performance of the national economy and helps in designing policies that government use to influence the economy....
5 Pages (1250 words) Essay

The theory of supply and demand

cs subsequently used the term in his 1776 book in which he presumed that the supply price was inflexible, but its value would eventually diminish as its scarcity increased (Krugman and Wells 89).... The theory of supply and demand concludes that, within a competitive market, the unit price of a certain product or service will vary until it stabilizes at a point where the number of goods demanded by consumers at the current price will equal the amount supplied by producers at the same price....
3 Pages (750 words) Essay

Microeconomics Theories and Businesses and Markets Behaviour

Microeconomics Theories and Businesses & Markets Behaviour The body of economic literature can be categorised into two kinds of theories including macroeconomics theories and microeconomics theories.... 1), the disappointing economic performance of the world is insisting the economists to re-examine the macroeconomics theories, however, it can be expected that microeconomics theories are facing a relatively a little tranquillity.... Basically, capital moves from one field of production to the other depending on where the demand is high and this fluctuation results in prices changes and created capital scarcity when there is a glut....
5 Pages (1250 words) Article

Principles of Microeconomics

et us understand the concept through an example.... o, macroeconomics deals and solves the problems that arise with fluctuations in aggregate demand and aggregate supply in markets which, as a result, leads to problems of inflation, and deficits in balance of payments, and unemployment. ... 2005 macroeconomics 2nd ed.... Individuals and all societies have unlimited wants or and have limited resources to fulfill these unlimited wants and this is called scarcity of resources. ...
9 Pages (2250 words) Assignment

World Economy - Neoliberalism

Therefore economics tackles the concept of scarcity.... Before going on to the concept of neoliberalism, a brief discussion on basic economics would help in the understanding.... the concept of cost is usually the “monetary measure of the resources sacrificed or forgone to achieve a specific objective, such as acquiring a good or service,” (Drury 2008, p.... For the sake of economics, the study limits the concept of cost in terms of money....
7 Pages (1750 words) Literature review

Gendering Macroeconomics: The Challenge of Promoting Gender Equality

This paper analyzes gender inequality in macroeconomics, particularly in relation to the concept of ‘social reproduction' and ‘gender budgeting'.... Separating the concept of wage from social reproduction has suggested that the process and outcomes of social mechanism, and especially its role in building and sustaining the labor force, were irrelevant to the field of economic analysis (Peck, 1996).... the concept of social reproduction is used to define the effort and time needed to build the future workforce and to sustain the welfare and security of the individuals in households and communities. ...
14 Pages (3500 words) Term Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us