Chapter 3—Scarcity, Trade-Offs and Economic Growth

Sovereignty is defined as unlimited power over a country or a country's independent authority and the right to govern itself according to Merriam Webster dictionary.

7. A market economy is the concept of supply and demand. This is a good thing because the goods that are being sold are based on how many there are and the demand for that good. For example if you were to buy a lobster, and lets say at that time there was a big catch, that would make the price of the lobster drop a lot. The down side of a market economy is that the individual businesses do not make the set prices, and have no say in how much the good would

Currently in the United States of America is a free market where the market outcomes determine the cost

The first key insight that I will be going over is from chapter 14 of How an Economy Grows. In this chapter we see how Peter and Andrew Schiff talk about a housing market on one of the islands often referred to. Everyone in the business of building, maintaining, and loaning money for a new hut wants to continue making money through their business. Nobody cares about the glut that is going on through hut building. Everyone just wants their money. They are being lied to by the media and hut builders and lenders that everything is fine. The key insight I took away from this is not to let the media fool you. Discernment in every aspect of life is important. Discernment is how you will be able to ignore false media news to ensure proper understanding of any given subject.

One of the issues that economists fail to discuss, then, is the fact that market-oriented economics is merely an artifact of our own social structure and that the grounding concepts of economics are quite different. Indeed, the grounding concepts of economics deal with the fact that people need to produce food, shelter, and clothing for their survival and that "economics" is born within the formation of any arrangement to solve the survival problem. The essential factors are production and distribution by and within the community. Economics, in other words, is part of the culture of any surviving community.

Sovereignty is the absolute power over a certain area or region. This power in the past has been given to monarchs, royal sovereignty, or even to a group of people that decide the fate for the masses, parliamentary sovereignty. The amazing thing about our government however is Popular Sovereignty, which is the absolute power given to the people that the powers are meant to govern. The beauty of this is that the government follows the Locke-Hobbes idea that a government needs to be a social contract between its people and its ruling body.

2. What are the four different types of economic resources? Describe each type. The first one is land, this includes all of your natural resources like soil and gold. The second one is labour, this includes all of your human resources like labour force. The third one is capital, this includes all of you man made resources like machines. The fourth one is enterprise, which includes your organizing the above 3 and involves taking the risk of production in a free enterprise economy.

Not all aspects of economic growth are positive, for example when an economy is at, or near its full capacity of productivity prices can be driven up causing inflation and the devaluing of their currency, where each unit of currency buys fewer goods and services that it previously could have. It can increase the

Businesses can decide which goods to produce and in what quantity and consumers can decide what they want to purchase and at what price. The role of the state is limited to ensure right precision in the prices charged by the sellers. Prices also have the function to allocate and distribute a country’s resources. Market leads to complete effectiveness bringing about the best possible distribution of a country’s resources in a perfect world. This would only happen in a state of equilibrium and there is a unique price for every commodity. But in a realistic world which is imperfect by nature, prices are never at equilibrium and very unstable depending upon the vagaries of the market forces. This generally harms people living below the poverty line. It is impossible for them to pay high prices in cases of demand shortage. Thus, the free market model is not a viable option in developing countries which has a large number of poor. Besides, producers are aim to minimize profit and maximize rent of production. Examples of countries that are using this economy system are Hong Kong, USA, and UK. Many developing countries like India and China are moving towards totally free-market economy.

Everyone can relate to working under pressure, time is scarce as work is being finished at the last minute. People who don’t manage their time well often neglect their work and race against deadlines. This behavior is known as scarcity, which is expounded in the book Scarcity: Why Having So Little Means So Much, written by Sendil Mullainathan and Eldar Shafir. Mullainathan and Shafir define scarcity as “having less than you feel you need”(4). Scarcity alters perception of resources like time, which leads people to believe they do not have enough. Scarcity is composed of several components, the most significant being abundance, neglect, and slack. Abundance is a period where we waste time. Neglect is when we ignore “important but not urgent

Different market decisions determine how an economy is run. There are several different factors that account for how markets make their decisions, which determines how they function. The theory of markets mostly depends on supply and demand. However, it is key to note that there is a difference in demand/supply and quantity demanded/supplied. A demand is how much the buyer plans to purchase at various markets prices and the quantity demanded is what the buyer actually purchases at a particular price. Supply is the producer or the seller’s plan of the amount the seller will make available at different market prices and the quantity supplied is the actual amount that the seller makes available at a particular market price. It is important to

Economic growth is a necessary but not sufficient condition of economic development. There is no single definition that encompasses all the aspects of economic development. The most comprehensive definition perhaps of economic development is the one given by Todaro: ‘Development is not purely an economic phenomenon but rather a multi – dimensional process involving reorganization and re orientation of the entire economic and social system. Development is a process of improving the quality of all human lives with three equally important aspects. These are: 1.

Unfortunately, in the real world a nation is likely to tackle increasing opportunity costs (Salvatore, 2012): in fact, a nation usually renounces to produce more and more of a first commodity to be able to produce each extra unit of a second commodity and in this case its PPF is concave. This happens because the more a resource is utilized, the more it becomes inefficient for the production of a same good.

The authors have studied the Solow Model of economic growth, which assumes the neoclassic production function of decreasing returns to capital. Solow proposed the model while considers the rate of saving and population growth as exogenous and demonstrated that the countries reach the steady state level of income per capita. However, the classical Solow model is not able to explain cross-country variation in the standard of living. The Solow model predicts the effect of saving and population growth on economic growth qualitatively but not quantitatively .The authors have augmented the Solow model with accumulation of Human capital as well as physical capital. The authors have analyzed empirical data of year1965-1985 with the textbook Solow model & augmented Solow Model for three different samples including Non-oil, Intermediate and OECD. The authors demonstrated that augmented Solow model is still valid to explain the international variation in income per capita.

The theory of economic growth sparked a revolution that has touched most societies across the globe. (Need to finish the abstract)