Summary_Handout1 - (For class discussion only The Economist's Dictionary of Economics defines economics as"The study of the production distribution and

Summary_Handout1 - (For class discussion only The...

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(For class discussion only) The Economist's Dictionary of Economics defines economics as "The study of the production, distribution and consumption of wealth in human society". Kathmandu School of Law, B.B.M., L.L.B 2 nd semester Unit 1: Introduction to Microeconomics and Basic Concepts 1.1 Basic Economic Issues Scarcity, Efficiency and Alternatives 1.1.1 Scarcity Definition of 'Scarcity' The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, various economic decisions must be made to allocate resources efficiently. Investopedia explains 'Scarcity' When we talk of scarcity within an economic context, it refers to limited resources, not a lack of riches. These resources are the inputs of production: land, labor and capital. People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up (trading off) one want to satisfy another. We are always uncovering of new wants and needs which producers attempt to supply by using factors of production. For a perspective on the achievements of countries in meeting people’s basic needs, the Human Development Index produced by the United Nations is worth reading. The economist Amartya Sen (Winner of the 1998 Nobel Prize for Economics) has written extensively on this issue. Scarcity means we all have to make choices Because of scarcity, choices must be made by consumers, businesses and governments. For example, over six million people travel into London each day and they make decisions about when to travel, whether to use the bus, the tube, to walk or cycle or work from home. Millions of decisions are taken, many of them are habitual – but somehow on most days, people get to work on time and they get home too in safety if not in comfort. 1.1.2 Efficiency Efficiency is a measurable concept that can be determined by determining the ratio of useful output to total input. It minimizes the waste of resources such as physical materials, energy and time, while successfully achieving the desired output. Simple Definition of efficiency: the ability to do something or produce something without wasting materials, time, or energy: the quality or degree of being efficient (technical). Performing or functioning in the best possible manner with the least waste of time and effort; having and using requisite knowledge and skill. 1.1.3. Alternatives Definition of alternative : a proposition or situation offering a choice between two or more things only one of which may be chosen. An opportunity for deciding between two or more courses or propositions is called alternatives. One of the two or more ways of achieving the same desired end or goal . An alternative does not have to be a close substitute for the first choice (or other alternatives), or must solve the problem in a particular way. For example, bundling , extensive promotion , lower price , money-bank guaranty , special offer , etc., are all alternative ways for achieving the same end: 1
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