Topic: The Economic Problem (Part 1) - page 2. (Read 263 times)

Alright then but has economics being able to play that role adequately? Has it been able to distribute resources equally without the influence of politics? Like you said the fundamental purpose of economics is to distribute resources but politics have been an influencing factor that has made the distribution unequally distributed. Economics is only rolling out the hypothesis, economic models but it has not operated adequately in the face of politics and corruption, lobbying.

Sorry for the title giving the wrong impression.

I was talking about the fundamental problem that economics was created to solve: how to distribute resources to the places where is it needed.

Economic fulfillment is not only based on natural resources, but indeed we must also see how the performance of human resources in it.
it will be very natural when talking about the needs of all there will always be needs that have not been met.
on the other hand, it is true that natural resources are also very limited and it will not be possible to always exist and surely one day it will be difficult and even run out.
What I might emphasize is to return to the human resources themselves, how to manage these limited natural resources will be an advantage for them. because for me this will be very important when human resources can contribute more and are able to manage and use their resources well automatically all will prosper.
it will be a different story when human resources are weak and only rely on existing things, then natural resources that are unlimited and abundant will feel lacking and always feel dissatisfied.

I know that if you want everything to be good from an economic perspective that supports or fulfills all unlimited needs from limited resources, it depends on how the wealth management of a country is managed and the management system of cooperation with the community. If this is not in the control of the economy as a whole, even with unlimited resources, everything will feel less.

If the people themselves do not realize their potential, especially in the surrounding environment, it is the same as owning a car but not being able to drive it. Collaboration between the community and the government must be in line with the economic potential. When all have the energy to build, then no one is harmed. But that is ideal in economics, it's just that nothing is really ideal in managing sources of wealth that are profitable for certain parties.

In fact,need to analize first,50% live in earth,life status not all millionaire.Many investors,to invest any business.Now  economic problems is increasing demands of people but decrease of supply,to others to produce and manufactures for every products.Problems nowadays,unemployment of every country,more EDUCATED but available jobs is less not suitable for there courses.Economic problems,not only for money,who invest,the business,we consider also,those who supplier and producers.

Any questions would be welcome!

I am just utilizing the knowledge I found via reading and watching a lot on economics!

The main problem at the center of economics is how to fulfill unlimited wants with limited resources.

What it means is how you can meet the ever-changing, every growing cloud of desires with resources (basically your materials, time, capital, and machinery) that are limited in both capacity and time.

Therefore, the economy has to answer three questions:



1. What to produce?
(What goods and services to produce in order to maximize the amount of utility (satisfaction) gained from the product.)

2. How to produce?
(What methods of production should be used to produce the goods and services that are needed)

3. Where should the output go?
(How should the output be distributed to people)

In order to outline the economic problem, we need to learn about the factors of production with a down to earth example...



Land is basically all the natural resources that a business uses (water, fish, metal ores, and in our case, the soil the plant grows in)

Labour is the workers who use the natural resources to make a product (In this case, our out-of-shot gardener waters and takes care of our little plant.

Capital is the tools the workers use to create the product (In our case, the watering can and the plant pot is the tools used in growing our rocket)

And finally, enterprise is the idea that unites all of this together (In the case of the picture, it is to grow and sell rocket plants).

In an economy, we can map out how these factors of production are allocated with a production possibilities frontier.

This diagram shows all the combinations of two goods that can be produced within a single economy.

For our example, we will assume that our theoretical economy only produces two goods, CPUs and GPUs.
(In real life economies can produce more than two goods at the same time.)



An economy is productively efficient at point A on the red line. This is when the economy maximizes the use of all available factors to produce either CPUs or GPUs.

At point B inside the red line, the economy is not producing as many GPUs and CPUs as it could at the red line. This may be due to factors that prevent the economy from utilizing them efficiently (e.g. A rise in unemployment).

At point C outside the red line, the economy would have to use more factors of production than it currently has in order to reach this point.

There are two types of efficiencies: productive and allocative.

Productive efficiency is when the economy maximizes the output produced with the factors of production it has. (For this example, it means producing as many GPUs and CPUs as possible with the factors available at the red line.)

Allocative efficiency is when the economy maximizes the benefits everyone receives from a combination of two products. (Basically what combination of CPUs and GPUs gives people the greatest benefit)

While you can measure productive efficiency by moving to the red line, allocative efficiency is more difficult to find out as what is considered the most beneficial combination varies from person to person.

Let us say that instead of going to point A, you would like to produce point A1.



As we move from B to B1, we have to give up some GPUs in order to get the amount of CPUs we want.

This is the opportunity cost of our change from A to A1, what we have to give up in order to get what we want.

The only way to get to C is for the economy to increase the total amount of factors available, shifting to the right from A to C as a result.

If you have any questions, you can reply to this post or PM me.

See you next time!