Introduction

There is no such thing as a free lunch (TINSTAAFL).” Making decisions requires trading
one goal for another. Examples include how students spend their time, how a family decides to
spend its income, how the government spends revenue, and how regulations may protect the
environment at a cost to firm owners. A special example of a trade-off is the trade-off between
efficiency and equality.
Definition of equality: the property of distributing economic prosperity fairly among the
members of society. For example, tax paid by wealthy people and then distributed to poor may
improve equality but lower the incentive for hard work and therefore reduce the level of output
produced by our resources. This implies that the cost of this increased equality is a reduction in
the efficient use of our resources.
Significance of opportunity cost in decision making
Because people face tradeoffs, making decisions requires comparing the costs and
benefits of alternative courses of action. The cost of going to college for a year is not just the
tuition, books, and fees, but also the foregone wages. Seeing a movie is not just the price of the
ticket, but the value of the time you spend in the theater
Definition of opportunity cost: whatever must be given up in order to obtain some item next
best alternative forgone When making any decision, decision makers should consider the
opportunity costs of each possible.
Rational people think at the margin
Definition of rational: systematically and purposefully doing the best you can to achieve
your objectives. Consumers want to purchase the bundle of goods and services that allow them
the greatest level of satisfaction given their incomes and the prices they face. Firms want to
produce the level of output that maximizes the profits. Many decisions in life involve
incremental decisions: Should I remain in school this semester? Should I take another course this
semester? Should I study an additional hour for tomorrow’s exam? Rational people often make
decisions by comparing marginal benefits and marginal costs. If the additional satisfaction
obtained by an addition in the units of a commodity is equal to the price a consumer is willing to
pay for that commodity, he achieves maximum satisfaction, which is the main goal of every
rational consumer.
Markets are usually a good way to organize economic activity
Many countries that once had centrally planned economies have abandoned this system
and are trying to develop market economies.
Definition of market economy: an economy that allocates resources through the decentralized
decisions of many firms and households as they interact in markets for goods and services.
Market prices reflect both the value of a product to consumers and the cost of the resources used
to produce it. Centrally planned economies have failed because they did not allow the market to
work.
Government can sometimes improve market outcomes
There are two broad reasons for the government to interfere with the economy: the
promotion of efficiency and equality. Government policy can be most useful when there is
market failure.
Definition of market failure: a situation in which a market left on its own fails to allocate
resources efficiently.
A country's standard of living depends on country production
Differences in the standard of living from one country to another are quite large. Changes
in living standards over time are also quite large. The explanation for differences in living
standards lies in differences in productivity.
Definition of productivity: the quantity of goods and services produced from each hour of a
worker’s time. High productivity implies a high standard of living. Thus, policymakers must
understand the impact of any policy on our ability to produce goods and services. To boost living
standards the policy makers need to raise productivity by ensuring that workers are well
educated, have the tools needed to produce goods and services, and have access to the best
available technology.
QUESTION TWO
Introduction
Economics emerge for the communication sciences as a means to supply an institutional
framework over which it makes sense to analyse some well specified agent actions. In particular,
consumer-oriented disciplines, like marketing and advertising, and firm oriented subjects, like
organisational communication, make use of the economic context to place activities and
individuals in their right positions, and this seems all that the economic science can give to the
referred research fields. After that, the way agents behave becomes, under a communication
perspective, something that is apparently much closer to phenomena that only sociological and
psychological paradigms can explain. Hence, it is not strange that the above group of scientific
fields gets help from Economics only when it is necessary
- Firstly, to know the meaning and the measurement procedure of some economic indicators
that allow us to understand the global context
under which marketing activities, for instance, take place.
- Secondly, to give some glimpses of how the world economy evolves and how the several eco
nomies (countries) interact; this is also a central issue, for example, to perceive how the diffe
rent kinds of goods and services will be able to impose themselves in the progressively globa
l world we live in today. 
It seems clear, we think, that marketing and advertising activities must have an exact perception
of how the markets behave and evolve in order to find business opportunities. It is an illusion to
think that a business is local, that is, what happens elsewhere does not have important effects
over all the economic activities in some restricted geographical area. We can say that there are
no more local businesses: there can only be well succeeded enterprises when a broad view is
adopted. This is because even if we plan to sell a good only to a small market, the truth is that
one must be conscious that individual actions here are conditioned by the economic events in the
rest of the world. This is true more than ever in the present day, but it is not a recent evidence.
Scarcity as an economic concept "refers to the basic fact of life that there exists only a finite
amount of human and nonhuman resources which the best technical knowledge is capable of
using to produce only limited maximum amounts of each economic good. If the conditions of
scarcity didn't exist and an "infinite amount of every good could be produced or human wants
fully satisfied there would be no economic goods, i.e. goods that are relatively scarce. Scarcity is
the limited availability of a commodity, which may be in demand in the market or by the
commons. Scarcity also includes an individual's lack of resources to buy commodities. The
opposite of scarcity is abundance.
British economist Lionel Robbins is famous for his definition of economics which uses scarcity:
Economics is the science which studies human behaviour as a relationship between ends and
scarce means which have alternative uses. Economic theory views absolute and relative scarcity
as distinct concepts and is quick in emphasizing that it is relative scarcity that defines
economics."[6] Current economic theory is derived in large part from the concept of relative
scarcity which states that goods are scarce because there are not enough resources to produce all
the goods that people want to consume.
Malthus and Absolute Scarcity
Thomas Robert Malthus laid the "...theoretical foundation of the conventional wisdom
that has dominated the debate, both scientifically and ideologically, on global hunger and
famines for almost two centuries. In his 1798 book An Essay on the Principle of Population,
Malthus observed that an increase in a nation's food production improved the well-being of the
populace, but the improvement was temporary because it led to population growth, which in turn
restored the original per capita production level preventive checks, such as moral restraints or
legislative action for example the choice by a private citizen to engage in abstinence and delay
marriage until their finances become balanced, or restriction of legal marriage or parenting rights
for persons deemed "deficient" or "unfit" by the government.
 positive checks, such as disease, starvation, and war, which lead to high rates of premature
death resulting in what is termed a Malthusian catastrophe. The adjacent diagram depicts the
abstract point at which such an event would occur, in terms of the existing population and
food supply: when the population reaches or exceeds the capacity of the shared supply,
positive checks are forced to occur, restoring balance. (In reality, the situation would be
significantly more nuanced due to complex regional and individual disparities around access
to food, water, and other resources.) Positive checks by their nature are more "extreme and
involuntary by nature.
Samuelson and Relative Scarcity
Further information: Economics (textbook)
Samuelson tied the notion of relative scarcity to that of economic goods when he observed
that if the conditions of scarcity didn't exist and an "infinite amount of every good could be
produced or human wants fully satisfied ... there would be no economic goods, i.e. goods that
are relatively scarce. The basic economic fact is that this "limitation of the total resources
capable of producing different (goods) makes necessary a choice between relatively scarce
commodities."
Modern concepts of scarcity.
 Scarcity refers to a gap between limited resources and theoretically limitless wants.[19] The
notion of scarcity is that there is never enough (of something) to satisfy all conceivable
human wants, even at advanced states of human technology. Scarcity involves making a
sacrifice—giving something up, or making a trade-off in order to obtain more of the scarce
resource that is wanted.
QUESTION THREE
Introduction to Financial Institution
Financial Institutions are referred to as a company that deals in all types of finance-related
businesses. They are different from banks and play a very important part in broadening the
financial services in the country. They provide a very attractive rate of returns to the customers
in comparison to any government-centric banks. It deals in loans and advances and also
specializes in some specified sectors like hire purchases and leasing etc.
Explanation
The financial institution deals with finance-related services. These are gaining popularity day by
day nowadays. The attractive rate of returns on the customer’s investment is very demanding. It
also provides specialized services like hire purchase and leasing, etc. The simple and organized
procedure of the institutions is becoming very complementary. It provide a broad range of
business opportunities. There are different types of financial institutions. The goal of all the
institutions is different and they provide different services and have different levels of risk
associated with it. All the financial institutions have unique features and it works in a specialized
way. The financial institution is gaining immense popularity in broadening the finance-related
services in the country.
Role of Financial Institutions
 The financial institution provides varied kinds of financial services to the customers.
 The financial institution provides an attractive rate of return to the customers.
 Promotes the direct investment by the customers and making them understand the risk
associated with that as well.
 It helps in forming the liquidity of the stock in case of an emergency in the financial markets.
Features
 It provides a high rate of return to the customers who have invested in the financial
institution.
 It reduces the cost of financial services provided.
 It is considered very important for the development of financial services in the country.
 It also advises the customers on how to deal with the equity and the other securities bought
and sold in the market.
 It helps to improvise decision making because it follows a systematic approach to calculate
all the risks and rewards.
How does it work?
Financial institutions work like banks in some ways. They give loans and advances to the
customers and also set a platform for the customers to do some investments. The customers get
exciting offers and returns from them and therefore these institutions are gaining popularity. It
also provide consultancy services to the clients on their investments related to the financial
markets where the huge amount of risk is involved. Moreover, the customers who are handing
over their hard-earned monies to such institutions should check for the history and origin of this
financial institution.
Types of Financial Institutions
 Investment Banks
 Commercial Banks
 Internet Banks
 Retail Banking
 Insurance companies
 Mortgage companies.
Functions
 The financial institutions provide loans and advances to the customers.
 The rate of return is very high in case of investment made in this type of institution.
 It also gives a high rated consultancy to the customers for their beneficial investments.
 It also serve as a depository for their customers.
 It can also make an effort to minimize the monitoring cost of the company.
 All the finance related work is done by the financial institution or on behalf of the
customers.
Financial Institutions vs Banks
  The functions of payments of various services are done by the bank but the financial
institutions will not be able to do so.
 It cannot accept the demand deposit whereas the banks can accept the demand deposit by
the customers.
 Banks provide the guarantee of repayment of the deposit whereas the financial
institutions may fail to do so.
Advantages and Disadvantages
Below are the advantages and disadvantages:
Advantages
 The financial institutions help in the upliftment of the economies of our country.
 It has been proved to be more successful in terms of return earned by the customers since
the rate of return is higher compared to any other place.
 It is also a smart way to invest money and keep the money rotated in the finance market.
 It provides financial services to the customers.
 The repayment facility is also very well managed in the financial institutions.
 It also provide underwriting facilities.
Disadvantages
 The process is very complex for some customers because they try to indulge in various
businesses and end up making confusion for themselves.
 In case of default done by the management of the financial institutions, the customers
will have to face major worse circumstances. The money which they have invested may
not be recovered. Sometimes the principal amount is not assured to be recovered because
the government in case of default announces a certain sum of money which will be repaid
and most of the time the amount of government declare to be repaid is very less in
comparison to the principal amount of the investment made.
Conclusion
The financial institutions provide the best way to invest the money and to earn good returns from
that investment. It try to help our nation in building up economies. They provide a very unique
and advanced way to keep the money safe. The customers should also understand that the
institutions also carry some risk factors associated with their services. The customers should very
carefully understand the policies of the institutions and should check the Non-performing Asset
of the company before investing their money in the financial institutions. The default in the case
is a panic situation because the repayment can be very tough in that situation.

References
Siddiqui, A.S. (2011). Comprehensive Economics XII. Laxmi Publications Pvt
Limited. ISBN 978-81-318-0368-4. Retrieved 2017-11-20.
Montani G. (1987) Scarcity. In: Palgrave Macmillan (eds) The New Palgrave Dictionary of
Economics. Palgrave Macmillan, London.
Montani G. (1987) in "scarcity" citing Walras, L. 1926. Elements of Pure Economics, or the
Theory of Social Wealth. Trans. W. Jaffé. London: George Allen & Unwin, 1954.
Reprinted, Fairfield: A.M. Kelley, 1977.
Robbins, An Essay on the nature and significance of Economic Science, p. 15
Raiklin, Ernest, and Bülent Uyar. "On the relativity of the concepts of needs, wants, scarcity and
opportunity cost." International Journal of Social Economics (1996).