Yousf
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i just wanted somebody to explain:

how does scarcity give RISE to, choice, exchange, and specialization.

Thanks!
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_Fergo
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(Original post by Yousf)
i just wanted somebody to explain:

how does scarcity give RISE to, choice, exchange, and specialization.

Thanks!
Scarcity means that resources are insufficient to satisfy the unlimited wants of people.

This, in turn, means that choices have to made -and everyone makes such choices. Individuals, for instance, have to choose what to buy, firms have to choose what to produce and how, and the government has to choose when to intervene in the economy or what to fund, eg. healthcare or education?

Specialisation, in this case, is a means of addressing scarcity; it is a situation where individuals, firms, regions or governments focus on producing specific goods and services (ie only produce these specific goods).

However, this requires that those "specialising" must trade/exchange their limited goods and services to acquire other resources, so that they may satisfy their own wants.

Money, by the way, provides the means of exchange due to it being widely accepted for trade. A market, a place where consumers and producers meet to exchange their goods, is also required.

Hope this has helped (albeit it is very brief)!
Let me know if you need anything else...
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Yousf
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(Original post by *Stefan*)
Scarcity means that resources are insufficient to satisfy the unlimited wants of people.

This, in turn, means that choices have to made -and everyone makes such choices. Individuals, for instance, have to choose what to buy, firms have to choose what to produce and how, and the government has to choose when to intervene in the economy or what to fund, eg. healthcare or education?

Specialisation, in this case, is a means of addressing scarcity; it is a situation where individuals, firms, regions or governments focus on producing specific goods and services (ie only produce these specific goods).

However, this requires that those "specialising" must trade/exchange their limited goods and services to acquire other resources, so that they may satisfy their own wants.

Money, by the way, provides the means of exchange due to it being widely accepted for trade. A market, a place where consumers and producers meet to exchange their goods, is also required.

Hope this has helped (albeit it is very brief)!
Let me know if you need anything else...
Will do, Thank you very much!
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Yousf
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(Original post by *Stefan*)
Scarcity means that resources are insufficient to satisfy the unlimited wants of people.

This, in turn, means that choices have to made -and everyone makes such choices. Individuals, for instance, have to choose what to buy, firms have to choose what to produce and how, and the government has to choose when to intervene in the economy or what to fund, eg. healthcare or education?

Specialisation, in this case, is a means of addressing scarcity; it is a situation where individuals, firms, regions or governments focus on producing specific goods and services (ie only produce these specific goods).

However, this requires that those "specialising" must trade/exchange their limited goods and services to acquire other resources, so that they may satisfy their own wants.

Money, by the way, provides the means of exchange due to it being widely accepted for trade. A market, a place where consumers and producers meet to exchange their goods, is also required.

Hope this has helped (albeit it is very brief)!
Let me know if you need anything else...
Hey again, found you finally! I just have faced a bit of confusion with elasticities, do i always ignore the negative sign for xed yed pes and ped
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_Fergo
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(Original post by Yousf)
Hey again, found you finally! I just have faced a bit of confusion with elasticities, do i always ignore the negative sign for xed yed pes and ped
Hey,

Hope revision is going well

You may only ignore the sign for the PED (which is always minus, so some people just ignore it), and the PES, since that's always positive. There may be some cases where the examiners play with the signs here, so be careful to state anything out of the ordinary.

The sign plays an important role for both the XED and YED values.

XED:
-Positive = the two products are substitutes. The higher the positive value, the closer the substitutes are. Substitutes, by the way, are products where the consumer chooses one of the two (ie xbox and playstation).
-Negative = the two products are complements. The higher the negative value, the closer the complements are. Complements are products used together (ie cars and fuel).

YED:
-Positive = the product is a normal good. This means that as the consumers' income increases, the quantity demanded of that product will increase as well (that's almost always applicable for luxury goods, such as brand fragrances etc).
-Negative = the product is an inferior good. This means that as the consumers' income increases, the quantity demanded will fall, as people will now be able to buy normal goods and won't have to settle for goods of lower quality. One example is probably clothing -when people don't have much money to spare, they'll probably buy cheap non-designer clothing. If they do have lots of money, they'll probably go for brands like Prada, D&G etc.
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Yousf
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(Original post by *Stefan*)
Hey,

Hope revision is going well

You may only ignore the sign for the PED (which is always minus, so some people just ignore it), and the PES, since that's always positive. There may be some cases where the examiners play with the signs here, so be careful to state anything out of the ordinary.

The sign plays an important role for both the XED and YED values.

XED:
-Positive = the two products are substitutes. The higher the positive value, the closer the substitutes are. Substitutes, by the way, are products where the consumer chooses one of the two (ie xbox and playstation).
-Negative = the two products are complements. The higher the negative value, the closer the complements are. Complements are products used together (ie cars and fuel).

YED:
-Positive = the product is a normal good. This means that as the consumers' income increases, the quantity demanded of that product will increase as well (that's almost always applicable for luxury goods, such as brand fragrances etc).
-Negative = the product is an inferior good. This means that as the consumers' income increases, the quantity demanded will fall, as people will now be able to buy normal goods and won't have to settle for goods of lower quality. One example is probably clothing -when people don't have much money to spare, they'll probably buy cheap non-designer clothing. If they do have lots of money, they'll probably go for brands like Prada, D&G etc.
wow! Amazing, so greatful. I was doing a past paper and i was given 2 yed values. One was 2.0 the other was -1.6. When i checked the mark scheme it said both are income elastic. But wouldn't -1.6 be inelastic because we dont ignore the negative with yed and -1.6 is less than 1.

Thank you so much
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_Fergo
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(Original post by Yousf)
wow! Amazing, so greatful. I was doing a past paper and i was given 2 yed values. One was 2.0 the other was -1.6. When i checked the mark scheme it said both are income elastic. But wouldn't -1.6 be inelastic because we dont ignore the negative with yed and -1.6 is less than 1.

Thank you so much
The sign does not indicate the elasticity of the product. It would be inelastic if those values were below 1 or -1 (positive and negative elasticity respectively).

The sign is only used to indicate the type of the product.

In this case, the product with an YED value of 2.0 is a normal good (-if consumers' incomes increase, more people will buy the product), while the product with an YED value of -1.6 is an inferior good (-if consumers' incomes increase, fewer people will buy the product).

The change in the demand depends on the exact value of the YED. For example, the product with a 2.0 value is pretty elastic (positive income elasticity) and so the increase in the quantity demanded will be high if incomes increase.
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Yousf
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(Original post by *Stefan*)
The sign does not indicate the elasticity of the product. It would be inelastic if those values were below 1 or -1 (positive and negative elasticity respectively).

The sign is only used to indicate the type of the product.

In this case, the product with an YED value of 2.0 is a normal good (-if consumers' incomes increase, more people will buy the product), while the product with an YED value of -1.6 is an inferior good (-if consumers' incomes increase, fewer people will buy the product).

The change in the demand depends on the exact value of the YED. For example, the product with a 2.0 value is pretty elastic (positive income elasticity) and so the increase in the quantity demanded will be high if incomes increase.
Wow makes so much sense now, thank you!!
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