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As people age i.e. moving from childhood to adulthood, there is an inevitable change in their demands and needs in life. However, this does not imply that these demands will diminish all the same. Dynamism of human wants is based on this principle. That there is a certain degree of change in one’s preferences and tastes, though without lessening that particular good completely. From this example, the fact that this individual gets coffee every morning, does not guarantee satisfaction for his wants forever. Furthermore, the individual will not even satisfy his desire for coffee overtime. Aging drives people away from having specific goods. For instance, as the boys grow, the size of their toys tend to increase. This is despite the fact that they’ve been having the toys all through. Their wants evolve. In this case, in terms of size. In essence, wants for a specific good may be satisfied currently, but still other wants grow from the same good as well. Eventually, wants from other goods will also require satisfaction which will keep on changing as time goes by (Gallo 2015).
Scarcity in this context implies the difficulty to find, uncommon or rarity. Resources denotes means that aid in making the goods or rather the supplies. They could be in terms of natural resources, say oil. Consistent productivity calls for a steady flow of these supplies and if they don’t get, it implies the end product will be scarce (Economic Times 2015). Essentially, the resulting goods and services are rare partly because the inherent raw materials are not receiving supplies that can be used to maximize returns. According to the Bureau of Economic Analysis (2015), the resources i.e. goods and services are rare because there are limited resources’ to produce them as a result. Primarily, for a house to be built, there should be tools and materials. If these tools are not availed, then it becomes difficult to build the house. The tools and raw materials are thus the resources while the house is the goods and services. In summary, if the there was a limitless supply of resources, then there would never be a problem of scarce products they would produce.
All economic problems are down to relative scarcity of resources. Wants surpass resources. In this sense, it is impossible to solve all economic problems. That is attaining satisfaction for each and everyone’s wants and needs. Moreover, satisfaction of everybody’s wants would lead to a non-existent price on all items such that people wouldn’t have to pay for what they already have. Also, with all fulfilled wants, there wouldn’t be economic resources. People will surely not make payments for the inputs while they can get all the output. Conclusively, the non-existence of free goods and services is enough reason for the impossibility of total satisfaction of human wants. As a result, there are no absolute solutions for the economic problems (Ariely, 2009).
Firstly, determinants of elasticity include; proportion of the budget an item consumes. Items that consume a larger share of the consumer’s budget usually have a greater elasticity scale. This is illustrated by foreign travel with a 4.0 elasticity. Furthermore, this is a luxury service and such services have an elastic demand. Thus, a change in the price charged on foreign travel by one unit results to a 4.0 change in the quantity i.e. the number of people using the service. Consumers are very sensitive to price changes. Hence price is highly elastic (Kling, 2007).
Secondly, elasticity in physician’s service implies that a change in price charged on physician’s service results to a 0.6 change in the quantity demanded. This alludes to the degree of necessity of the product. Consumers are fired to buy more of the product or seek the service regardless of the price. This tends to lower the elasticity’s. In this respect, the critical nature of the physician’s service makes it a necessity and thus inelastic demand. Necessity of the product is notably a key determinant of the elasticity.
Thirdly, radio and television receivers alludes to close substitutes as further indicated by its elasticity scale of 1.2. With more possible substitutes for a good, the higher its elasticity. Even if there is a small change in the price, consumers easily switch from one good to another. Here, consumers can chose between the radio or television antenna since they are close substitutes of each other. Consequently, it leads to elastic demand.
Newspapers; they are closely tied with the proportion of the consumers income spent on getting them. Since the consumers spends a relatively low amount of their income to get it, it will not be too responsive to changes in price. It therefore characterized with a low elasticity scale as indicated by 0.1 implying a generally inelastic demand. Also, duration of the change in prices influences this elasticity scale. According to Economic Fundamentals (2016), newspapers do are ‘characterized’ with rapid changes in prices. It will therefore have a lower elasticity since consumers do not pay much attention to the little changes that take place.
Conventionally, dismal economic performance is characterized with low levels of innovation and invention, technological use, diversity, foreign and domestic trade. In addition, inflation, poor foreign exchange, high unemployment are rife. All these contribute to low output implying “there were too few goods”. This is a period “before economic growth”. So this time features high demand for the few goods and services. Firms are not producing at their maximum production capacity due to the financial constraints majorly. On the other hand economic growth will involve low levels of unemployment, low levels of inflation, booming foreign and domestic trade with a diversified economy. As a result, firms are producing at their maximum capacity. This is possible due to a wider market both domestically and abroad, available cheap raw materials. Furthermore, the economic expansion opens up forward and backward linkages. Economics Online (2013) postulates that increase in output makes firms dedicated to ensure that they keep the economy at its peak hence enjoying the benefits that come with it. These sustained production activities will consume the time meant for relaxation and enjoyment of the progress made. This growth will have “less time”. Perhaps the reason for this consistent involvement that is devoid of time to relax is due to is due to the uncertainty about the economic situation in the near future since a combination of factors often beyond control of a n individual can sway it in a different direction. Production activities are in operation all through and more enhanced after economic growth.
Rationality in economic decision making is such a huge daunting task in terms of time scale. Consumers and producers are often called upon to make decisions that result to their optimal individual benefit or utility. Making a rational decision therefore is a great deal of time which factors so many other components. These components may make it difficult to arrive at a rational decision on a regular and consistent basis. The existence of emotional theory alludes to ‘rational decisions’ being influenced by emotional state, past experiences, individual’s expectations and their memory (Seth, 2010). Consequently, as these factors do not work in isolation, people are often caught up situations that they put a lot of faith in recent information which then skews their decision making.
Ariely, D (2009). The end of rational economics, Harvard Business Review. Available at 2016 >https://hbr.org/2009/07/the-end-of-rational-economics< [Accessed August 4, 2016]
Bureau of Economic Analysis (2015). What is gross output by industry and how does it differ from gross domestic product by industry? Available at >www.bea.gov/faq/index.cfm?faq_id=1034< [Accessed August 4, 2016]
Economics online (2013). Price elasticity of demand. Available at > www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_demand.html < [accessed August 4, 2016]
Gallo, A (2015). What is price elasticity: How is it calculated, Harvard Business Review. Available at, >https://hbr.org/2015/08/a-refresher-on-price-elasticity< [Accessed August 4, 2016]
Economic Fundamentals (2016). Price elasticity. Available at >economics.fundamentalfinance.com/micro_price-elasticity.php< [Accessed August 4, 2016]
Kling A. (2007). Is economics all about scarcity? Library Economics Liberty. Available at >www.econlib.org/library/Topics/College/scarcity.html< [Accessed August 4, 2016]
Economic Times (2016). Definition of ‘Rational Behavior’. Available at > m.economictimes.com/definition/rational-behaviour< [Accessed August 4, 2016]
Seth, T (2010). Human wants: characteristics of human wants and their classification, Economics discussions. Available at >www.economicsdiscussion.net/articles/human-wants-characteristics-and-classification-of-human-wants/2016< [Accessed August 4, 2016]
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