Tourism and Travel

Economics
TTM 130
Lesson 15-14

Using Economic Analysis to

Support Decision-making
 Study Objective:
After studying this chapter student should be
able to:
- Define Scarcity.
- Describe choices .
- Identify Production Equation:
Using Economic Analysis to Support
Decision-making
ECONOMIC DECISION-MAKING
 Scarcity
•Unlimited Wants chasing limited
resources
• Different for everybody
• Value placed on resources in one
country may be different than value
placed on same resource in another
country.

• “Basic needs”
defined differently
from one place to
another.
 Scarcity

• Scarcity caused by limited resources used to create those goods

and services
• There is nothing that we have an unlimited supply of
– NOTHING

• Money and wealth in the end do not matter

• There will always be something you cant have.
 Choices
•In economic terms, we refer to choices as trade-
offs.
•The process of making these choices involves a
cost-benefit analysis
•These can be complex equations or a simple question
of “what do I give up in order to get this other thing I
want”.
•Costs – what must go into getting the
product/outcome
•Benefit – what is gained from the decision
• Cost Benefit Analysis = Looking at what is spent versus
what is earned from a potential decision
What are the elements of an economy that constitute our
wants?

Inputs and Outputs

Inputs: scarce resources that go into the process = the

factors of production
Land
Labor
Capital

Outputs: goods & services produced using these

resources
What are the elements of an economy that constitute our wants?

Production Equation:

Land + Labor + Capital = goods & services