How Does the Study of Economics Depend on the Phenomenon of Scarcity?
How does the study of economics depend on the phenomenon of scarcity?
You could say Economics is the science of scarcity. There would be no need for economics if we could legally and morally obtain all of the food, clothing, housing, transportation, energy sources (gas, oil, electric, etc), and the rest of life’s necessities we need or even want without having to exchange work (or currency which is a medium of exchange representing work, goods, services) or other resources (which are also scarce) in exchange. It pertains to the opportunity cost, which is the value of goods and services that must be given up to obtain a unit of a particular good or service. If nothing were scarce, nothing would have value.
Economics would not exist without scarcity. Consumers and producers would not be forced to make decisions about how they spend their time and money, prices would not matter, and how resources are allocated would be irrelevant if everything had an unlimited supply.
Explain why an economy’s income must equal its spending.
For every buyer there must be a seller. Inputs (production) must equal outputs (goods and services). To put it another way, if I spend a dollar another person must receive that dollar. The transaction contributes equally to income and expenditures.
What is the difference between the GDP deflator and the Consumer Price Index?
The GDP Deflator reflects prices of all goods and services produced within the country, whereas CPI reflects the prices of a representative basket of goods and services purchased by the consumers. The CPI uses a fixed basket of goods and services just bought by consumers whereas the GDP deflator compares the price of ALL currently produced goods relative to price of goods and services in a base year. GDP deflator does not include