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Theme 1 Economics (1.1 (1.1.1 (The problem of scarcity (where there are…

- - - - Scarcity is when individuals, businesses and governments all have unlimited wants but only limited or finite resources with which to satisfy those wants.
        
        Thus society needs to compromise or choose the allocation of resources are spread due to how much of the resource can be supplied to what of it is demanded.
        
        Opportunity Costs is the next best alternatives that has been sacrificed
        
        The importance of opportunity costs is particularly useful when the ultimate benefits of spending decisions are uncertain. For example for a business this may be the choice between buying a new van or getting new equipment, but the business has to choose which one will benefit them the most.
        
        Trade off, is where having one of one thing leads to having less of another.
  - - - Profit Maximization - involves short run or long run processes by which a firm determines the price and output level that returns the greatest profit
        
        Profit maximization is a way for the business cash flow to maintain as well allows the business to grow and invest
      - Sales Maximization - when the firm sells as much as possible without making a loss
        
        This is an important objective in a competitive market
      - Satisficing when a firm does not seek maximum profits or sales but achieves good enough level of profit to ensure survival without undue stress and worry.
        
        This may be a small independent firm who seeks to be there own boss but is not looking for fast growth or long hours a good balance of home and work life
      - Other Objectives
        
        Survival- is the long term goal; covering costs matters the most when a firm is facing hostile conditions such as recession or intense competition.
        
        Market Share- it may be a main objective to expand and gain a certain share of the market in order to increase market power.
        
        Cost efficiency- as a firm is facing tough trading conditions and is in danger of making a loss
        
        Return on investment - this may be a main objective to try and please share holders or be able to return investments to start reinvesting back into the business.
        
        Employee welfare to be able to create adequate conditions for staff to improve productivity and have better working conditions
        
        Customer satisfaction to create a good brand name and gain competitive advantage over other companies.
        
        Social benefits to aim to benefit the society to be able to create ethical social environmental or ethical goals. Create good brand image.