Basic Economic Concept
YOU WILL LEARN:
•
Analyse needs and wants
•
Different types of goods
•
Alternative uses of resources
•
Scarcity
•
Opportunity cost
•
Price mechanism
Activity
Maldives has many uninhabited islands which can be used in different
ways. A small island with attractive white beaches can be used in many
ways.
a)
List three possible ways this resource can be used.
a)
Suppose this small island is used as a picnic island. What would be
the opportunity cost of using the island as a picnic island?
a)
In your opinion, explain how this resource can be best utilized.
Production Possibility Curve (PPC) is a
graphical representation of maximum
quantity of two products and the
possible combination of these two
goods with constant resources and
technology. Production possibility
curve illustrates the opportunity cost
of choice.
•
Figure 1.1.4 shows that a country can
produce either 80 units of manufactured
goods or 75 units of agricultural goods or
a range combination of both the goods.
•
If the country decides to produce 68 units
of manufactured goods it can only
produce 35 units of agricultural goods.
And, if the country decides to produce 65
units of agricultural goods it will have
resources available to produce only 35
units of manufactured goods.
•
Thus, the opportunity cost of producing
extra 30 units of agricultural goods is 33
units of manufactured good.