Questions on Economics Related to Basic Economics Concepts and Theories

QUESTION ONE [30]
1.1 The concept of scarcity is a basic economic concept which suggests that the resources are limited. Human needs and wants are unlimited while the resources in the form of time, money, raw materials and labour are limited which requires individuals to make choices about how they can utilise the limited resources in a productive way. Opportunity cost on the other hand is another important economic concept that indicates the value of the next best alternative that is forgone while undertaking a decision. This implies that the main difference between both these concepts is scarcity indicates that choices need to be made within limited resources while opportunity cost indicates what is given up when a choice is made due to scarcity.
b). Marginal utility and weighted marginal utility (6)
c). Microeconomics and macroeconomics (6)
1.2 Examine the two (main) factors that contribute to economic growth according to the production possibility frontier model. (12)

QUESTION TWO [40]
2.1 The supply of a good or service can be influenced by many factors. In terms of this statement, examine four (4) factors that affect individual supply. (16)
2.2 Distinguish between accounting profit and economic profit. Include in your answer, an explanation of how each is calculated and discuss the significance of opportunity costs in determining economic profit. (14)
2.3 Examine the consumer equilibrium condition according to marginal utility theory. (10)

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Answers to Above Questions on Economics

Expert Answer 1:

Conept of Scarcity and Opportunity Costs in Economics

1.1: The concept of scarcity is a basic economic concept which suggests that the resources are limited. Human needs and wants are unlimited while the resources in the form of time, money, raw materials and labour are limited which requires individuals to make choices about how they can utilise the limited resources in a productive way. Opportunity cost on the other hand is another important economic concept that indicates the value of the next best alternative that is forgone while undertaking a decision. This implies that the main difference between both these concepts is scarcity indicates that choices need to be made within limited resources while opportunity cost indicates what is given up when a choice is made due to scarcity.

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