What determines whether or not a resource is scarce? Why is the concept of scarcity important to the definition of economics?
In economics, resources are factors of production. There are three primary resources which include land, labor, and capital. There are situations when scarcity of resources is experienced in economics. Scarcity refers to the gap between the limited available resources and the many needs that ought to be satisfied (Cohn, 2016). Determination of scarcity of a resource is based on supply. A resource that has a finite supply is said to scarce because it would eventually run out causing a scarcity in the economy. The importance of scarcity is that it ensures that existing resources are appropriately utilized. Managers of resources will efficiently use their skills to control and efficiently use the available resources. In economics, scarcity is vital because it determines the equilibrium of an economy (Pearce & Turner, 2017). For instance, diamond is a scarce resource, and therefore it is highly priced. With an increase in price, the consumer’s demand will decrease. Therefore, the trend will assist in sustaining an efficient market equilibrium, and thus the scarcity of a resource shall not be depleted so fast. Scarcity ensures that a specific curve for demand and supply is established which is essential in keeping the economy stable and ensuring that consumers are satisfied.
Why do economists pay more attention to national economies (for example the U.S. or Canadian economies) than the state or provincial economies (such as California or Ontario)?
Given by the fact that national economies provide better indicators of the economic health of a country, most economists chose to pay more attention to the national economies as compared to lower-level economies which are either state or provincial economies. Additionally, the national economies have significant data which can be used for prediction purposes apart from analyzing the main economic variables (Hausmann, Pritchett & Rodrik, 2014). Economists can use the information from national economics to establish trends and business cycles. It is also important to note there are few and minor factors that affect the provincial economies; the elements are also likely to vary from one state to another; thus they cannot be easily used. Also, there are more people involved in the national economies than any other area that makes up an economy; this is important because in a macro-level economy, only the fluctuations at the national level matter (Weckstein, 2017). Although there are cases where some state economies depend on a given industry which may also include the national interests, the overall trend in the whole economy is what matters in an economy.
Why doesn’t the National Bureau of Economic Research identify the turning points in economic activity until months after they occur?
The process of identifying a turning point involves the use of data which is collected and analyzed before concluding the findings. The data is made of information about prices, levels of inventories, outputs, and employment among other quantitative and qualitative data that can be obtained from an economy (Stock & Watson, 2015). It is evident that all these requirements need significant time, effort and finances to conclude accurately. Also, after the collection of data, a reasonable time must be allowed to provide a ground for comparison of data to identify a turning point. From a statistical point of view, there must be a comparative analysis of the present and past data. All the mentioned requirements indicate that it is possible to have some lag between the time when a change is an economic activity is realized and the time when the difference can be recognized through data (Pearce & Turner, 2017). Additionally, economic recessions and depressions are measured after a long time to obtain accurate data during the determination of stability of a country, and this is the reason for the extended period experienced in determining a turning point.
Cohn, Jessica. (2016). What Is Scarcity of Resources? Paw Prints.
Durlauf, S. N., Johnson, P., & National Bureau of Economic Research. (2016). Local versus global convergence across national economies. Cambridge, MA: National Bureau of Economic Research.
Hausmann, R., Pritchett, L., & Rodrik, D. (2014). Growth accelerations. Cambridge, Mass: National Bureau of Economic Research.
Pearce, D. W., & Turner, R. K. (2017). Economics of natural resources and the environment. Baltimore: Johns Hopkins University Press.
Stock, J. H., & Watson, M. W. (2015). Estimating Turning Points Using Large Data Sets. Cambridge, Mass: National Bureau of Economic Research.
Weckstein, R. S. (2017). Expansion of world trade and the growth of national economies: Significant papers. New York: Harper & Row.