Regie V.

Albelda BSA III

Eco 1A BE 318 (9:00 10:00)

1. What is Economic Problem?
Economic problem is a problem of choice (UPADHYAYA, 2012). One has to
choose which goods or services will consume and in what quantity. Economic
problem arises the moment the problem of choice arises.
A problem of choice that exist because of insufficiency of available resources
that will satisfy the unlimited needs and wants of all human beings. This is widely
known as scarcity. In satisfying a particular persons wants, resources maybe
sufficient enough but for the satisfaction of all the wants in the society, resources
are scare (www.businessdictionary.com).
Therefore, economic problem exists because of insufficiency of available
resources that will satisfy the unlimited needs and wants of all human beings.
2. What are economic tools?
Economic tools are economic models (Gill, 2011). These tools can be used by
economists and urban planners for socio-economic appraisal to improve the way
of living in the society.
These economic models are formulated to explain different phenomenon and
to explain relationship between two or more variables. The tools of economic
analysis are found in the realm of Mathematics. Examples of economic tools are
social cost-benefit analysis, input-output analysis, economic impact study and
business case (www.NewEconomyAnalytics.com).
Therefore, economic tools are formulated to explain different phenomenon
and to explain relationships between two or more variables.
3. What is production possibilities frontier?
Production possibilities frontier is a set of combination of goods (Villegas,
2010). This combination of goods was shown in a graphical model which shows
the capacity and the demand of two different goods in the society at a given
price.
A set of combination indicating the points where the economy is most efficient
in producing its goods and services that results in a proper allocation of scarce
resources (Haekal, 2014). The point within the curve indicates efficient allocation,
while the points inside is inefficient and on the outside is impossible allocation.
Therefore, production possibilities frontier are points on the graph indicating
where the economy is most efficient in producing its goods and services that
results in proper allocation of scarce resources.
4. What is market equilibrium?
Market equilibrium is a state of balance (Villegas, 2010). This is where the
proper allocation of resources takes place that results in efficiently usage of
resources.
A state of balance that is determined by the intersection of the demand and
supply curve (Gabay , 2012). This means that the supply is equal to what is
demanded in the market and since there is neither surplus nor shortage, the price
tends to remain stable.
Therefore, market equilibrium is determined by the intersection of the demand
and supply curve which means that supply and demand are equal.