Question

Write a 2-3 page paper answering the following questions on Basic Economics:

1. What did you learn about the scarcity of resources?
2. Who was Adam Smith and what impact does he have on economic theory?
3. What is the importance of understanding Elasticity and Utility? Supply and Demand?
4. How do we measure the health of the economy?

Answer 1

1) What did you learn about the scarcity of resources?

Basic economics helped us in knowing that resources as scarce and have alternative uses. Any resource can be used to do multiple things at a given point of time. Further these resources combine to form a product and thus must be used to get best out of the same.

For example a piece of wood can be used to make furniture or the pulp can be used to make paper. A country thus must spend its resources wisely in the areas where its technological expertise is relatively higher so as to enable itself to see higher profits and better currency patterns.

2) Who was Adam Smith and what impact does he have on economic theory?

Adam Smith is regarded as the father of economics and gave various theories that helped economies in growing the way that they have. He was born in Scotland and largely changed how modern societies work.

He was an advocator of property rights and that of capitalism and largely wrote in his theory "The Wealth of Nations" that countries must progress from being controlled by governments to gradually allow people to have a free hand in what they bought and sold in the market place.

He strongly believed in market equilibrium by capitalism and advocated that equilibrium can take place only when the government restricts itself to law and order than taking part in business activities.

He was one of the pioneers of formation of the Term Gross Domestic Product which is actively used to assess the performance of a nation.

3) What is the importance of understanding Elasticity and Utility? Supply and Demand?

Elasticity refers to the degree of change which supply and demand have in regards to the prices of the goods and services that are offered. Generally with a price increase the supply of goods increases since companies start to make more profits selling at higher prices and demand falls because people have limited means to buy products.

Utility on the other hands refer to the amounts of satisfaction which an individual gets by consuming a unit of the product.

The main importance of understand the concepts of Elasticity and utility from the supply side would give producers the idea on what to produce and the quantity in which it needs to be produced so as to cause highest customer satisfaction and retention.

On the other hand, on the demand an understanding of the concepts would allow a perfect balance between budget and the available choices and highest customer satisfaction.

4) How do we measure the health of the economy?

The health of an economy can be measured by performance indexes such as the gross domestic product, employment levels, inflation, educational status and distribution of income.

These measures help at estimating the average income of a household and patters in which they spend their money can help in analyzing the health of an economy. This helps the government to adopt relevant policies to achieve success within the economy.

Please feel free to ask your doubts in the comments section