Economics is so far so good to me. I'm not sure about others but I actually find econs the most interesting subject so far. Well, that is for now. I know things are still in its basic and there are more to learn and things might even get tougher. I do hope I'll be able to cope well but one thing I know for now is that I sure am looking forward to more of the new things I'll be learning in Economics as time comes.
Okay let's see, we have learnt about scarcity which is the basic economic problem that arises among humans. Humans have unlimited wants but there are only limited resources available. Humans want all the goods and services but sadly the resources/ FOP's ( Factors of production ) are limited. The FOP's are land, labour, capital and enterprise.
After getting to know about what scarcity is, this brings us to opportunity cost. It is the next best alternative forgone. It is when humans have to give up something in order to get another. All economic goods have an oppurtunity cost thus they have an economic value towards it. Free goods on the other hand does not have an opportunity cost as the good is not scarce and will not have monetary value to it.
Then, there is the production possibility curve/ frontier ( PPC/PPF). The ppc shows us what we are about to give up in order to achieve another. In other words the ppc is used to illustrate the opportunity cost.
We then moved on to the 3 economic systems. I was absent from class when the lecturer was teaching on this subtopic. To be honest, I was a little lost when I got back. After reading through the notes and doing some research, here is what I have understood on the 3 economic system. We begin with the free market economy.
In a free market economy, economic resources are owned largely by the private sector with very little state intervention. The allocation of resources is via the price mechanism. Consumers are the one who indicate what goods they want and the price willing to be paid on those goods.
Next in line is the planned/command economy. All the decisions are made done by the central planning board known as planning mechanism. Planners decide on what goods to produce, how to produce and for whom the goods are produced for.
Lastly, the mixed economy. In my opinion, I find the mixed economy the best because economic resources and owned are own and controlled by both private and public sectors.
We then move on to specialisation. Workers specialize on a specific task that they are best in to produce goods and services. Workers have to give up performing other tasks which they are not as skilled, leaving them to others who are better suited for them. Specialisation by individual is known as division of labour. Specialisation increases output as workers do not waste time shifting among tasks. The downside of specialisation is that workers might get bored doing the same job after a long period of time. Besides, machinery may eventually replace the workers and this may lead to unemployment.
And finally, we come into $$$. MONEY. Money has four functions. They act as a medium of exchange, unit of account, a store of value and a standard deferred payment. Imagine a world without money, all transactions would have to be conducted by barter. The barter system is not the best choice because exchange can only take place there is a double coincidence of wants between two transacting parties.Money effectively eliminates the double coincidence of wants problem by serving as a medium of exchange that is accepted in all transactions.
Money also function as a unit of account. It is used to establish the value of all goods and services. Besides, money also acts as a store of value. People save money for future use therefore money must hold its value over time. Money may not even be the best store of value because it depreciates with inflation. However, money is more liquid than most other stores of value because as a medium of exchange. Finally, money can act as a standard deferred payment. Creditors are willing to allow you to defer your payments because they are assured that at the end of the credit period, they will be receiving money which is something of worth.
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