Scarcity and Efficiency refers to the Twin themes of Economics; Scarcity occurs where it's impossible to meet all unlimited

the desires and needs of the peoples with limited resources i.e; goods and services. Society must need to find a balance between sacrificing one resource and that will result in getting other. Efficiency denotes the most effective use of a society's resources in satisfying peoples wants and needs. It means that the economy's resources are being used as effectively as possible to satisfy people's needs and desires. Thus, the essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources.

In simple words it is a twin theme of Economics or i think it is best definition of Economics as following

Goods are scarce and our Society must use it Efficiently. scarcity-insufficient of resources like land,labour,and capital.

efficiency-maximum use of resources.

Scarcity And Efficiency The Twin Themes Of Economics Tue, 16 Aug 2011 15:29:26 | Public Goods 2

• looks at growth in developing countries and proposes ways to encourage the efficient use of resources. including interest rates and stock prices. • explores the behavior of the financial markets. • examines the distribution of income and suggests ways that the poor can be helped without harming the performance of the economy. . the study of economics has expanded to include a vast range of topics. What are the major definitions of these growing subjects?1 The important ones are that economics • analyzes how a society's institutions and technology affect prices and the allocation of resources among different uses.What is economics? Over the last half-century. • studies the business cycle and examines how monetary policy can be used to moderate the swings in unemployment and inflation. • studies the patterns of trade among nations and analyzes the impact of trade barriers.

Indeed. But if we boil down all these definitions. full employment. we find one common theme: Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.• asks how government policies can be used to pursue important goals such as rapid economic growth. you will need to understand its vocabulary. If you are not familiar with a particular word or phrase. Consider a world without scarcity. efficient use of resources. price stability. yet you could extend it many times over. and a fair distribution of income. you should consult the Glossary at the back of this book. The Glossary contains most of the major technical economic terms used in this book. All terms printed in boldface are defined in the Glossary. economics is an important subject because of the fact of scarcity and the desire for efficiency. Behind this definition are two key ideas in economics: that goods are scarce and that society must use its resources efficiently. what would be the consequences? People would not worry about stretching out their limited incomes because they could have everything they wanted. To master the subject. If infinite quantities of every good could be produced or if hu 1 This list contains several specialized terms from economics. man desires were fully satisfied. This list is a good one. businesses would not need to fret over the cost of labor .

particularly in Africa and Asia. like sand in the desert or seawater at the beach. outside the United States.or health care. it is important that an economy make the best use of its limited resources. all goods would be free. That brings us to the critical notion of efficiency. Given unlimited wants. Efficiency denotes the most effective use of a society's resources in satisfying people's wants and needs. consider an economy with unchecked monopolies or unhealthy pollution or unwarranted government interferences. you quickly find that there are simply not enough goods and services to satisfy even a small fraction of everyone's consumption desires. In such an Eden of affluence. and markets would be unnecessary. By contrast. Indeed. . All prices would be zero. full of economic goods. hundreds of millions of people suffer from hunger and material deprivation. even after two centuries of rapid economic growth. since all of us could have as much as we pleased. Moreover. Our national output would have to be many times larger before the average American could live at the level of the average doctor or big-league baseball player. Moreover. If you add up all the wants. economics would no longer be a useful subject. governments would not need to struggle over taxes or spending or pollution because nobody would care. A situation of scarcity is one in which goods are limited relative to desires. or it may produce a disorted bundle of goods that leaves consumers worse off than they otherwise could be—either situation is an inefficient allocation of resources. production in the United States is simply not high enough to meet everyone's desires. But no society has reached a utopia of limitless possibilities. Such an economy may produce less than would be possible without these factors. An objective observer would have to agree that. no one would be concerned about the distribution of incomes among different people or classes. Ours is a world of scarcity.

The essence of economics is to acknowledge the reality of scarcity and then figure out how to organize society in a way which produces the most efficient use of resources. Definition of Efficiency Efficiency is concerned with the optimal production and distribution or these scarce resources. . Economic Efficiency The fundamental economic problem is a scarcity of resources. That is where economics makes its unique contribution. Philippians deals with the themes of joy and suffering.In economics. Productive efficiency. we say that an economy is producing efficiently when it cannot make anyone economically better off without making someone else worse off. There are different types of efficiency 1.

This occurs when the maximum number of goods and services are produced with a given amount of inputs.Productive efficiency will also occur at the lowest point on the firms average costs curve 2. An economy could be productively efficient but produce goods people don’t need this would be allocative inefficient. Efficiency of scale This occurs when the firms produces on the lowest point of its Long run average cost and therefore benefits fully from economies of scale . for example a monopoly which makes supernormal profits may have little incentive to get rid of surplus labour. 3. This will occur on the production possibility frontier. Allocative efficiency This occurs when goods and services are distributed according to consumer preferences. X inefficiency: This occurs when firms do not have incentives to cut costs. On the curve it is impossible to produce more goods without producing less services. Therefore a firms average cost may be higher than necessary 4.

Dynamic efficiency involves the introduction of new technology and working practises to reduce costs over time. 8.5. Technical Efficiency Optimum combination of factor inputs to produce a good: related to productive efficiency. but by comparison would now be inefficient. It is defined as a situation where it is not possible to make one party better off without making another party worse off.. Pareto Efficiency A situation where resources are distributed in the most efficient way. . Social efficiency This occurs when externalities are taken into consideration and occurs at an output where the social cost of production (SMC) = the social benefit (SMB) 7. Dynamic efficiency This refers to efficiency over time for example a Ford factory in 1920 would be very efficient for the time period. 6.

capital. Society must choose among the wide assortment of alternatives when selecting which goods to produce. must decide which limited resources to use .THREE QUESTIONS OF ALLOCATION: The three basic questions that an economy must answer because of limited resources and unlimited wants and needs are: What? How? and For Whom? The basic problem of scarcity requires every society to determine: What goods to produce? How to produce the goods? And who receives the goods that are produced? The pervasive problem of scarcity means that every society must choose among alternative uses of its limited resources. and entrepreneurship that can be used to satisfy the unlimited wants and needs of its members. How? The second question that needs to be answered is: How are society's limited resources combined to produce goods and services? Are jogging shoes made with leather or nylon? Are houses built with wood or brick? Are cars made with hightech robots or manual labor? Society. This decision-making process. land. Choices must be made. more commonly termed allocation. is summarized by the three questions: What? How? For Whom? InBs12 What? The first question society must answer is: What goods and services are produced with society's limited resources? Does society make bagels or bread? Hammocks or hot fudge sundaes? Computers or Cadillacs? Birdfeed or battleships? This question is necessary because resources are limited but wants and needs are unlimited. Society wants a lot of goods and services. but everything cannot produced for everyone. Society has only so much labor.

but opts for less expensive ice milk. there is a thought. the production of goods is also limited. Society has to decide who gets what. . A hungry consumer may want a hot fudge sundae made with expensive creamy custard. what about people who have no income? With limited resources. But. For whom? The third of the three questions of allocation is: Who receives the goods and services produced with society's resources? All goods given to benevolent economics instructors? Should goods be distributed according to shoe size? What if people buy goods with their incomes? Now.for which goods. everyone cannot have everything. With limited goods. Every good cannot be made using the same resources.

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