Unit 1

Scarcity

Production Possibility Curve (PPC)

Money

Merit and Demerit Goods

What is scarcity?
scarcity exists where there’s not enough of something( products, services, resources, etc)
so people have to choose how to spend their resources in the most equitable way

Shows the maximun combined output an economy can produce with its existing resources. It can be efficient or inneficient depending if its in the line or or inside the curve

It can be:

A curved line (which means the opportunity cost is increasing because the two products can hardly be produced in the same place)

A Straight line (which means the opportunity cost is constant and every time we stop producing a certain amount of a product, we can increase the same amount of the other one)

It can have a shift (for the quantity of resources, the quality of resources or advances in technologies) in either one of the products or both

It can also have a decline (for natural resources exhausted, the pandemic, a failling working popuation or natural disasters)

Merit goods are those effects which have a positive effect (either in society or in a personal point of view) and demerit goods are those products which have a negative effect

Awareness Vs. Taxes

Merit goods examples:

Fruits, vegetables, education

Demerit goods examples

Cigarrate, beer, guns

Economic systems :

Is an easy way to show most of the population which are the demerit goods. Because the population can see this campaigns everywhere. In the internet like youtube or in a commercial center or maybe in the

Market Economy

Mixed Economy

Planned Economy


Awareness campaign
the consumer is able to know why he should not consume the demerit good and make a conscious decision
Raising taxes
the demerit good is less accessible to the consumer because of its price and it is more complicated to the company to produce it because the taxes are high
Conclusion
In our opinion, the most effective option is raising taxes because the product is less accessible to everyone, so people will consume it less, and that will create another problem to the company in addition to the one that the government is already putting them by raising the taxes, so the company will be more fragile and vulnerable.


Advantages: Reduces Inequality, Protects environment, Prevent Monopolies and ensures full employment

Disadvantages: No profit motive, high administration cost and corruption, slow responde to market changes

Disadvantages: Monopolies, Inequality, merit goods underptovided, pollution and over-consumptio of demerit goods

Advantages: Reduces poverty, provides public goods and services, Regulate markets, efficiency

Disadvantages: The government can turn into a planned econmy

Advantages: Efficient allocatrion of resources, consumers have freedom to choose, avoids inefficiency and corruption, innovation and new businesses

image

image

image

image