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3 Pages

Course Code
ECON 1000
David Stamos

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The key problem for society is to reconcile the conflict between our virtually endless desire for goods and services, and the limited resources in our economy and planet. Economics: the study of how society decides to allocate scarce resources in determining what, how, and for whom to produce. It investigates through a scientific method analysis how scarce resources are allocated between competing claims upon their use (societal issues). Resource allocation Assuming the oil OPEC example How: Oil prices rose, firms cut their use of oil based products, and the economy became less energy intensive and more energy efficient. What: Consumers switch to substitute products, choosing from gas, electricity, solar, wind, bio fuel and geothermal alternatives. For Whom: Increased revenues for OPEC and oil exporting countries that in turn could consume more goods and services. Note: In developed economies, the most important process in determining the what, how and for whom is the marketplace. Dynamic resource allocation Developed economies are developed because they have more capital and equipment than less developed economies. In addition developed economies have more human capital and a higher education level among workers. High growth economies: These economies are characterised by two key patterns. First, they allocated a large share of their resources to improving capital stock, they save and invest. People decide to allocate away from present consumption and towards investment so that future consumption could be higher. Second, Foster institution and property rights to workers to guarantee them that they will reap the rewards of their efforts and be granted title to what they purchased. They in turn will commit to investing and allocating resources to production. Scarcity and
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