Because of resource scarcity, economic agents must make choices. Making choices not only applies to consumers but also businesses and governments.We have to make choices about the money and time we have. What items should we choose? How much
Economic Context
Scarcity in Economics: Its Relation to Resources, Needs, and Wants
What's it: Scarcity is a finite state, so it cannot fulfill something. In the introduction to economics, scarcity represents a condition in which limited resources cannot satisfy our needs and wants, which are unlimited.Economic
Economic Activity: From Needs and Wants to Growth and Measurement
Economic activity is the foundation of any society. It encompasses all the processes involved in producing, distributing, and consuming goods and services to meet human needs and wants. This constant cycle drives growth, innovation, and, ultimately,
Accelerator Effect: Understanding How Investment Drives Economic Growth
The accelerator effect is a powerful force in economics, driving economic growth during booms and intensifying downturns. It explains how changes in consumer spending trigger significant swings in business investment, impacting the overall health of
What is the Difference Between Needs and Wants?
The difference between needs and wants lies primarily in how essential they are to our survival. We must meet the needs to support daily activities.On the other hand, we don't always have to fulfill wants because they are less essential. At most,
Division of Labor: Efficiency Engine (Specialization, Productivity)Â
What's it: Division of labor means dividing the work required to produce a product into different and interdependent tasks. The company breaks down a complex production system into several units. They then assign tasks and workers to each unit.
Factors of Production: Types, Importance, and Reward
What's it: Factors of production are inputs for producing goods and providing services. They consist of land, labor, capital, and entrepreneurship. The last one, entrepreneurship, combines the other three factors of production. Also called resources
Elastic Demand: Meaning, How to Calculate It
Elastic demand means the quantity demanded is responsive to price changes. When prices rise by 5%, according to the law of demand, the quantity demanded falls by more than 5%. Conversely, when prices fall by 5%, the quantity demanded rises by more
Necessities: Meaning, Elasticity
Necessities are types of normal goods that their demand is inelastic in income. When consumer income changes, their demand quantity also changes but at a lower percentage than the change in income. For example, if consumer income rises from 5%, then
Luxury Goods: Meaning and Its Elasticity
Luxury goods are types of goods whose demand is higher than the increase in consumer income. Consumers ask for more when their income rises.Although they don't always have a high-quality connotation, they are often considered to be at the top in
How elasticity affects total revenue
Before answering how elasticity affects total revenue, you need to recall the following concepts in economics:Own-price elasticity of demand. It measures the responsiveness of changes in quantity demanded when prices change. Demand is price
Inferior Goods: Meaning, Its Price Elasticity
Inferior goods are groups of goods whose demand falls when consumer income rises. And, in economics, the demand for goods has a negative income elasticity (<0).Inferior good elasticityWe use income elasticity to categorize goods as