Chapter 1.1, Problem 1R

To determine

To Discuss: The importance of Economics, Microeconomics, Macroeconomics, Scarcity, Factors of Production which includes (land, labor, capital, goods, services, productivity, entrepreneurship, technology).

Explanation of Solution

Economy is a system spread over a particular area that reveals the nature and level of economic activities. It shows how people of that concerned area earn their livings. As resources are scarce, every economy faces the problem of: ‘What to produce’. ‘How to produce’ and for ‘Whom to produce’

Microeconomics studies how prices of goods and services are determined in the commodity market and how prices of factors of production are determined in factor market

Macroeconomics begins with the study of macroeconomics variables such as AD (Aggregate Demand) and AS (Aggregate Supply). It analyzes the level of output is struck (where aggregate demand = aggregate supply).

Scarcity occurs when resources are finite and limited, and we have to decide how and what to produce from these limited resources. It can be land, water scarcity, labor shortage.

Factors of production helps in increasing the value of economy by applying labor, land, capital. It improves welfare as more commodity means more utility like (new technologies, entrepreneurship) generates employment and incomes that help in economy growth.

Economics Concept Introduction

Introduction:

Economics refers to the subject matter that focuses on the rational management of scarce resources in a manner such that economic welfare gets maximized

Microeconomics occurs when economic problems or economic issues are studied considering small economic units like, individual consumer or individual producer refers to microeconomics.

Macroeconomics refers to the economic problem or issues at the whole level of economy. Its relate to the overall level of employment, stability of economy and growth rate of national

Scarcity refers to the situation when demand for goods exceeds their supply even at a zero price.

Factors of production are those which plays crucial role in our economic growth, i.e., (land, labor, capital and entrepreneurship). These factors results in GDP (Gross Domestic Product) growth.