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Scarcity and choice the economic problem
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Exercise10. Translate the words in brackets into Ukrainian.
As (особа/людина), for example, you … (стикаєтеся з проблемою) of having only … (обмежених ресурсів) with which you can … (задовольнити свої потреби та бажання), as a result, you must … (робити певні вибори) with your money. You'll probably … (витрачатимете) part of …(ваших грошей на)you rent, electricity and food. Then you might use the rest to go to the movies and/or … (купити нові джинси). … (Економісти) are interested in the … (виборами, які ви робите), and study why, for instance, you might … (обрати витратити ваші гроші) on a new DVD player instead of replacing your old TV. They … (хотіли б знати) whether you would still buy a carton of cigarettes if … (ціни/вартість) increased by $2 per pack. … (найважливіша мета економіки) is to try to understand how both … (окремі люди та країни) behave in response to certain material constraints*.
material constraints* – матеріальна скрута
Exercise 11. Translate the text into Ukrainian.
Opportunity Cost
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Opportunity cost is the value of what is foregone in order to have something else.
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This value is unique for each individual.
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You may, for instance, forgo ice cream in order to have an extra helping of mashed potatoes.
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For you, the mashed potatoes have a greater value than dessert.
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But you can always change your mind in the future because there may be some instances when the mashed potatoes are just not as attractive as the ice cream.
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The opportunity cost of an individual's decisions, therefore, is determined by his or her needs, wants, time and resources (income).
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Exercise 12. Translate the sentences into English using the active vocabulary.
Нестача – основна проблема, з якою стикаються усі суспільства.
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Нестача означає, що в один і той же час суспільство не може повністю досягти всіх своїх цілей.
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Нестача існує, тому що природа не забезпечує нас усіма ресурсами, необхідними для задоволення наших необмежених бажань.
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У світі нестачі неможливо отримати щось безкоштовно.
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Кожен стикається з пробле-мою обмежених ресурсів, щоб задовольнити свої бажання та потреби.
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Поняття “альтернативна вар-тість” стосується як окремих осіб, так і підприємств та уряду.
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Проблема нестачі, вибору та альтернативної вартості – це важливі економічні проблеми, які постають перед будь-якою господарською одиницею.
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Оскільки люди не можуть собі дозволити мати все, вони змушені робити вибір серед речей, які вони хотіли б.
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Оскільки людські бажання необмежені, а ресурси наявні для їх задоволення обмежені, ми повинні робити вибори щодо того, як використовувати ці ресурси.
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Існує межа кількості наявних ресурсів, але не існує межі людським бажанням.
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Альтернативна вартість пев-ної речі – це вартість того, від чого ми змушені відмовитись, щоб отримати саме цю річ.
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Рішення мати якусь річ є в той же час рішенням не мати чогось іншого.
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Особистий прибуток, заощад-ження, спроможність брати в борг впливають на вибір, який роблять люди.
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Exercise 13. Answer the following questions.
What do people realize going through their lives? 2. What are economic goods and free goods? Is there any difference between economic goods and free goods? If yes, how do they differ? 3. Why do all business units have to make their choices? 4. What does individual choice depend on? 5. What are governments and businesses limited by? 6. What makes everyone choose? 7. What does the necessity to make a choice result from? 8. What is scarcity? 9. What problem does everyone in any society face? 10. Why does scarcity force all decision makers to arrive at best decisions? 11. How do economists explain the essential sense of scarcity? 12. What is the opportunity cost? 13. What is the money cost of going to university? 14. What are forgone earnings? 15. Why do anyone who goes to university face the opportunity cost? What costs do the opportunity cost involve? 16. Why does the cost of doing something have nothing to do with spending money in most cases? 17. Why should people compare benefits before making their decisions? 18. What are the two sides of opportunity cost? 19. Why are scarcity, choice and opportunity cost interrelated?
Text for additional reading and discussion
Read the text and head it. Ask questions so as to cover the contents of the text. Discuss them in small groups.
In economics there is a saying: "There's no such thing as a free lunch". It means that nothing is really "free" because we use resources that could have been used for something else. We live in a world of scarce resources and unlimited wants. The concept of scarcity is essential to the field of economics. With scarcity come choices. Economics deals with how people and society make choices under conditions of scarcity, as well as the individual and social consequences of these choices. Economics is concerned with the analysis of this decision-making process. To make efficient decisions - decisions that provide the greatest possible earnings from the resources available - people and society must consider the benefits and costs of using their resources to get more of some things, and less of others. The reality is that we cannot have everything that we want. We must choose which of our desires we will meet and which we will leave unsatisfied. So, faced with scarcity, individuals, government and society must make choices.
Choosing any scarce thing sets the limit on other options. To the economist such foregone options are opportunity cost. Suppose you drive a car. Buying an extra gallon of gasoline may prevent you from buying an extra piece of pizza, but purchasing the pizza instead of the gas may force you to drive less and walk more. Economists view opportunity cost as the value of the next best option forgone when a choice is made.
You make different choices every day as well. Choices involve a trade-off of the value of one opportunity against the value of its best alternative. Are there any additional benefits and costs of studying economics rather than listening to music or meeting friends, or sleeping? Is watching TV the best use of your time? Is working at a fast-food restaurant better than the best alternative job or some other use of your time? Will you graduate the university? (Potential benefits include higher lifetime income, meeting interesting people, and the joy of learning; costs include expenditures for tuition, books and different supplies, the hard work in classes, and the income you could be making right now.) Where will you live and work? Will you marry? (Marriage involves both financial and psychological costs and benefits.) Will you have children? If so, how many? How will you spend your limited income? Decisions about these and other economic choices will create the course of your life.
For most people opportunity cost is measured by the money paid to produce or acquire goods, but opportunity cost is ultimately personal and involve far more than money alone.
Have you ever estimated the cost of your education? Consider the value of your time. Instead of studying and attending class, you could get a full-time or part-time job. You may be giving up better food and clothes, a nice car, and a comfortable apartment. The values of all forgone alternatives are the true costs of education. But suppose you quit school. The costs of your nice car, apartment, food, and clothing would include the forgone enjoyment of learning and campus life, and the higher future income and consumption your university degree might have made possible.
Questions for economic reasoning and discussion
Assume that you have just received your first pay of 730 hryvnias. Describe how the concepts of scarcity, opportunity costs and the need to make choices will affect the way in which you are going to spend your money.
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One of the scarce resources that direct our behavior is time. Each of us has only 24 hours in a day. How do you plan to allocate your time in a given day among alternatives? How do you consider the alternatives? Once you choose a most important use of time, why not spend all your time on it? Use the concept of opportunity cost in your answer.
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If you happen to drop out of the university, what things will change in your life? What, then, is the opportunity cost of your education?
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What is the difference between scarcity and poverty? If everyone in the world had enough to eat, could we say that food was no longer scarce? Can the problems of scarcity and poverty be solved?
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Choose the right variant. Only one is possible.
Scarcity
is the inability to satisfy all our wants.
leads to higher prices.
applies only to people living in poverty.
is not something that affects very rich people.
Which of the following statements is true?
Human wants are scarce but resources are limitless.
Human wants are limitless and resources are limitless.
Resources are scarce but human wants are limitless.
Resources are limitless but human wants are scarce.
Scarcity requires that we
produce efficiently.
learn to limit our wants.
make choices about what goods and services to produce.
have unlimited resources.
If Jon effectively uses available resources to satisfy wants, we say he
does not face opportunity costs.
makes a rational choice.
does not compare costs and benefits.
does not respond to incentives.
Economic choice and competitive behavior are the result of
basic human greed - жадоба.
poverty.
private ownership of resources.
scarcity.
What is opportunity cost?
Opportunity cost refers to costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.
Opportunity cost is the value of what we give up by not making the alternative choice.
Opportunity cost is a cost associated with the allocation of abundant resources among alternative uses.
Opportunity cost is a monetary measure of cost that takes into account only explicit costs (явні витрати), or costs that can be counted.
The highest-valued alternative that we give up to get something is the
incentive.
benefit.
opportunity cost.
costs.
The following is a rank ordering of how Ann would prefer to spend her time this evening: (1) study economics, (2) go to a concert, (3) do laundry, and (4) exercise. If she chooses to study economics, what is the opportunity cost of studying?
The benefits she forgoes by not going to the concert.
The sum of going to a concert, doing her laundry, and exercising.
Zero.
None of the above.
What economic fact prevents a hypothetic (гіпотетичний) nation from eliminating poverty?
Everyone in a hypothetic nation has plenty of money.
Scarcity.
Everyone in a hypothetic nation is poor.
People in a hypothetic nation are satisfied with their current standard of living.
Economics is a social science that studies the choices that individuals, businesses, governments, and entire societies make in the presence of
scarcity.
necessity.
efficiency.
poverty.
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