The Key Concepts in Economics
The Key Concepts in Economics
Four key points from the article below
New Zealand Curriculum Guides. (2015) Key concepts / Economics / Social sciences / Home – Senior Secondary. [Online] Seniorsecondary.tki.org.nz.
The articles describe several concepts of economics, among them are the following four key concepts; First is that scarcity of resources brings in the aspect of making choices and each choice has an opportunity cost. In the article, there are three other things that have been identified as things that reduce the scarcity of resources. These are;
Full employment of resources
The second key concept is that value has an impact on the economic choices made. This concept differs from person to person, that is, the same information can be valued differently by different parties.
Thirdly, it is stated that markets provide motivations and a way of balancing the scarce resources by setting prices which is in turn done by considering the demand and supply curves. Prices appear to be higher when the resource in question is very scarce or the demand is high.
Lastly, in a market where there are many sellers and buyers who sell and buy respectively what they want and they all determine the price of the goods as a team, the allocation of scare resources to meet the needs and wants of the community is done well. In such a case, there is market equilibrium since all demands are met and all supplies are supplied (New Zealand curriculum Guides, 2015).
Applying unemployment as an economic concept to the key points above
Unemployment is a situation where some of the scarce resources are not being utilised at a certain period. It increases the scarcity of resources since if there is underutilization of resources then less is being produced and customers lack satisfaction. Since the resources are always scarce, they all need to be fully utilised at any particular time in order to achieve maximum production despite its scarcity. As a result, the scarcity would not be felt. The value of a resource is based on how frequently and to what extent it can be employed.
Unemployment of a resource is an indication of a low valued resource and as a result, the unemployed resource might not be considered by consumers since most people prefer something with value. The unemployed resource will, therefore, remain idle and these will lower production due to underutilization of resources yet they are few. A resource that cannot be employed in production can rarely be exchanged for other goods and services. If a good cannot be traded then, there is no market and, therefore, there is no motivation and balancing of scarce resources. This means the prices will increase and there will be no equilibrium in the market. If a resource cannot be employed in a certain production, then it needs not be allocated. Therefore, some resources might not be bought since they are not needed. A perfectly competitive market requires that a seller can sell any good but, in this case, a seller of a good that is not helpful will not have a chance to sell that good. This shows that unemployment reduces the efficiency in the allocation of resources.
How unemployment could affect the U.S. economy
The effects below are related to unemployment of people as a resource by Mortimer. Unemployment of people has an impact on the U.S. economy and in particular on the government, on firms and on other people.
On the government, it causes low collection of revenue in terms of taxes which are the major source of revenue for most governments. When a person is employed, his/her income is taxed and thus increase the total amount of tax collected. It also lowers the economic growth due to less production which is as a result of a limited number of resources, people being employed. There will be higher welfare and supply-side costs too in the government. Welfare and supply-side costs will drain the government finances since more money will be spent on unemployed people who don’t contribute to the government’s revenues (Mortimer and Profile, 2013).
On firms, if the unemployment rate is higher, then most people will be desperate for any kind of jobs and will be willing to accept even low incomes. Therefore, the firm can employ more people at a lower cost and will also have the opportunity to choose whom they want for the multitudes. The demand for some goods and services will decrease while the demand for inferior goods will increase. This is due to the lower incomes earned by employed resources. There will also be high training cost since more labour will be employed and training is essential (Mortimer and Profile, 2013).
Unemployment causes the following impact on people; it lowers the standards of living, it makes one to lose his/her skill if the period of unemployment is long and it also affects a persons’ health due to depressions (Mortimer and Profile, 2013).
In conclusion, I agree with the article above “Key Concepts”. This is because resources are scarce especially in most developing countries which cause those countries to seek aid from developed countries. Where a resource is scarce, not every economic development will be met and thus the need to choose. In making these choices, the value of each economic development is considered. Also where there is no market, there will be no means of providing a balance of the scarce resources since everyone will remain with what he/she has. Where the market is not perfectly competitive, there may be monopolies who may raise the prices of certain commodities and, therefore, consumers might not afford them and, as a result, their needs and wants will not be met.
New Zealand Curriculum Guides, (2015). Key concepts / Economics / Social sciences / Home– Senior Secondary. [Online] Seniorsecondary.tki.org.nz. Reviewed at:http://seniorsecondary.tki.org.nz/Social-sciences/Economics/Keyconcepts#macroeconomics [Accessed 8 Nov. 2015].
Mortimer, R. and Profile, A. (2013). Effects of Unemployment | ROM Economics. [Online]ROM Economics. Reviewed at: http://www.romeconomics.com/effects-ofunemployment/ [Accessed 9 Nov. 2015].
Riley, G. (2015). Unemployment – Policies to Reduce Unemployment | Economics | tutor2u.[Online] Tutor2u.net. Reviewed at:http://www.tutor2u.net/economics/reference/unemployment-policies-to-reduceunemployment [Accessed 9 Nov. 2015].
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