(Microeconomics)
^^Economics^^ in general is a study of how an entity, whether it be an individual or an organization, manages and allocates its resources in the most efficient way possible.
It is a social science, aimed to study how resources are used and is often concerned with how resources can be used to their fullest potential.
The need to allocate and organize resources is derived from the basic concept of scarcity which exists. This doesn’t just apply to money management, politics, or the stock market
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Examples: A student who has 24 hours to spend, has to allocate his time properly (spending time with family, time for eating, time for sleeping, etc.) to make the most out of his day.
In this example, time becomes the resource to be managed.
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The ^^economic problem^^ states however that our needs our unlimited and as mentioned earlier, the resources available are scarce.
Using the above example, the boy would have to decide how much time he allocates to all his activities in a day because he has limited time (24 hours only).
In the realm of economics, all resources around us are considered to be limited; even the most basic things which exist around us like air or water
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Economic behaviors are first analyzed and then evaluated based on the researcher’s opinion. E.g. Refurbishment schemes can cause a decrease in the prices of second-hand phones
Both these approaches are crucial for the study of economics since economic theories are the core of our study, and theories require a hypothesis that is shaped based on what an individual feels or thinks
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^^Opportunity cost:^^ This is the cost we forgo or sacrifice, to opt for another choice
Formula: What one sacrifices/ What one gains
Example: The government has to choose between building a hospital and spending on the country’s defense.
If the government decides to build the hospital, spending on the defense of the country becomes an opportunity cost.
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^^PPC^^: Graphical representation of the best possible combination of two products a country can produce if it uses up all its resources efficiently
Points on the curve are attainable/producible.
Points inside/under the curve are attainable, but it would indicate that the economy is not efficient and can still produce more.
Points above the curve are not attainable (exceeding maximum capacity), but could be in the future if measures are taken
Considering point I, the country still has the capacity to produce more of either one good or another
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Unemployment doesn’t cause shifts in the curve because it indicates that the point of production is below the curve. A decline in unemployment would cause the point of production to move closer to the curve.
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^^The law of increasing costs^^ states that as we continue to produce more of a product, our opportunity cost tends to increase but not with same difference
Realistically, PPC curves are not straight lines and tend to be concave shaped
The reason for this concave shape is that certain resources are more compatible with the production of a specific good/service.
Thus when they are used up forcefully, they are less productive-hence the higher opportunity cost arises
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