Sub: Economics Topic: Scope of problems
The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not forsubmitting the same in lieu of their academic submissions for grades.
Problems of Scarcity
Millions of people suffer from economic privation. Some countries have ample natural resources butlack sufficient capital to develop an adequate transportation system and a strong industrial base. Theproblem is exacerbated when these countries have large populations
. For example
, China, with over1.3 billion people, has ample natural resources, but lacks sufficient capital for a nation its size. Chinahas experienced a dramatic increase in total production in recent years due to a shift toward a moremarket-oriented economy. However, the annual income or output of the average Chinese citizen isvery low, for what is produced must be shared by an exceptionally large number of people. India is ina similar situation, with a population of over 1 billion people, but with only moderate resources and achronic shortage to capital. Some areas are short of capital and technology, others lack naturalresources, and some have a shortage of skilled labor. Japan must allocate resources very wisely toproduce enough to support 127 million people from the output of a land area that is about the, size of Montana. Imagine what would happen if we were to crowd about 43 percent of the people of theUnited States into the state of Montana and tell them to feed and clothe themselves from theresources of that area alone.Frequently, when a country finds itself lacking the labor and/or land necessary for a high level of output, it can overcome the deficiency with an increase in human capital. Japan,
, hasoffset its lack of natural resources with an exceptionally high degree of industrial efficiency. Thispermits Japan to import raw materials, process them into finished goods, and sell them in domesticand foreign markets at a profit. A shortage of resources or labor may be overcome by the discovery' of new resources, the development of new and better techniques, and the use of better machinery' toproduce greater yields from existing resources. There are thousands of examples of ways in whichproductivity has been increased. Using synthetic fibers in place of natural fibers, plastics in place of metals, computers as a substitute for human labor, and lasers in place of old-fashioned surgical tools