Basic Economic Concepts
What is economics and how do economic concepts apply to your life? With the complexities of technology and the current global economy, it may be helpful to consider a simplified and hypothetical scenario of an ancient family of potters who lived in a remote area. While the family was skilled and efficient, they only needed a certain number of pots but still needed clothing, shelter, food, and more. After struggling to tend to their farm and being unable to sell any more pots in their area, the family moved to a village that was in need of pottery. In this village, the family no longer had to tend to the farm, build and renovate their home, or make clothing. By focusing on their skills, they were able to trade their pottery with other families who were skilled in those other areas. By collaborating with traveling merchants, the family was able to manufacture more pottery that was sold across the lands and brought wealth to the potter family.
For this Assignment, you will explain basic economic concepts, such as how scarcity and incentives affect economic decisions, how marginal analysis affects allocation of time and resources, how the production possibilities frontier for countries can be impacted by opportunity costs, and if absolute advantage and specialization create opportunities for gains from trade.
Submit your responses to the following prompts.
Provide an example of a scarce resource and a free resource. What are the key differences between the two? What can cause a free resource to become a scarce resource? Your response should be at least 75 words (1 paragraph) in length.
Economists argue there is “no such thing as a free lunch,” yet you’ve just had lunch with a friend who paid for it. Are the economists incorrect? Explain using basic principles of economics. Your response should be at least 75 words (1 paragraph) in length.
A manager notices the company’s sales personnel are offering its customers deals that, while increasing revenues, are lowering profits. After reviewing the company’s compensation plan, the manager finds bonuses are based on sales revenue. Explain the sales personnel’s behavior using the economic principle that “people respond to incentives” and recommend a change to the compensation plan to correct this problem. Your response should be at least 75 words (1 paragraph) in length.
Note: For each prompt, be sure to reference at least one scholarly source to support your answer.