The three basic economic questions are what to produce, how to produce it, and for whom to produce it. All three are to answer how we allocate resources to meet our needs and wants. But, then, the way we answer them also
Economic Context
What Are the Consequences of Scarcity in Economics?
The ultimate consequence of scarcity is making choices. We face limited resources. But, on the other hand, we have limited needs and wants. So, we have to choose what goods we should produce. Another choice is how we make
Does Scarcity Only Work For The Poor? What Causes Scarcity?
The answer is no. It happens to anyone. The key is the insufficiency of resources to satisfy needs and wants. And scarcity occurs when we use the limited resources available to meet our unlimited wants and needs. So,
Imports Impact: Competition, Growth, Inflation & More
Imports impact the economy in several aspects. For example, at the micro level, imports affect competition by increasing supply in the domestic market. Consequently, there is more pressure on prices and profitability in the domestic market.On the
Why Countries Import: A Look at Factors Affecting Imports
Availability is one of the fundamental factors affecting imports. We import goods from abroad because they are unavailable in the domestic market. For example, the domestic economy does not produce them because the geographical location does not
Reasons Why International Trade Exists
International trade exists for several reasons. First, differences in demand underlie trade. Certain products we want are not produced in our country but are only available in other countries, so we have to import them.Another key reason why
Benefits of International Trade
Increased access to cheaper and more varied goods and services is a key benefit of international trade. Thus, it allows us to increase well-being. We can satisfy our needs and wants by buying more varied and cheaper products not produced
Understanding the Economy’s Flow: Injections and Leakages in the Circular Flow Model
The circular flow of income depicts how money flows between businesses and households in an economy. However, this flow isn't perfectly circular. Some income gets withdrawn from the system (leakages), while other sources add income to the flow
Autarky Explained: Self-Sufficiency vs. Global Trade (Advantages & Disadvantages)
What's it: Autarky is a system or philosophy in which an economy seeks to be self-sufficient. If a country adopts this system, it will try to meet its needs from within. And suppose the country is not involved in international trade or capital flows.
Adverse Economic Shocks: Shaking the Foundations [Types, Impacts, Solutions]
What's it? An adverse economic shock is a sudden, unexpected, and dramatic change in aggregate supply and demand that hurts the economy. For example, shocks result in high and uncontrollable inflation or a recession. In other cases, they give rise to
Wage Rigidity: Causes, Effects, and Business Cycle Impact
What's it: Wage rigidity refers to a situation where wages are insensitive to changes in supply-demand in the labor market. For instance, when the unemployment rate is high, wages do not fall even though the demand for labor declines and
Understanding the Natural Rate of Unemployment
What's it: The natural rate of unemployment (NARU) is the unemployment rate when the economy is operating at full employment. Sometimes, it is equated with the non-accelerating inflation rate of unemployment (NAIRU), which is the