Scenario Concept

Scenario Concept

Having knowledge of economics can help individuals make good decisions about buying a home, saving for retirement, and paying for children's education among other things. But, ¿what is economy? Economy studies how societies can use scarce resources to produce valuable commodities and distribute them among different individuals. Economy also explores the behavior of financial markets, interest rates, and exchange rates. It analyzes the reasons of high income in some countries and why others are poor. It examines business cycles, fluctuations in the credits, unemployment, inflation, International trade, finance, and the impact of globalization. Economy also analyzes and explores the management of government policies and economic growth. Although society has unlimited wants and needs, our world is one of scarcity with a limited number of resources (2008).

Although society has unlimited wants and needs, our world is one of scarcity with a limited number of resources. Individuals must give up certain products in order to make other products because of the limitations of these resources. Since the wants and needs are unlimited, it is important that an economy makes good use of its limited resources. This approach leads to the fundamental concept of efficiency which means using efficiently the resources to meet the needs and wants of the individuals (2008).

One of the most important models in economics is the basic supply and demand curve because markets do not have to follow instructions from an authority to allocate resources. The analysis for the foundation of the Theory of the Consumer is Two Goods - Two Prices which explains the origin of the demand curve for a good. The monopolistic, monopoly, and perfect competition models are the main elements of the Theory of the Firm which explore the foundations of the supply curve for a good (2008).

The study of individual decision making units, such as business firms, workers, or consumers is called microeconomics. The study of economy as a whole or its aggregates is called macroeconomics. Both society and individuals face economic problems. The need to make decisions because wants exceeds needs is an economic problem. Factors of production or inputs which are also called scarce economic resources are capital, entrepreneurial ability, labor, and land. Limited resources can be used in many ways like private services, government services, goods, and services (2008).

A production possibility curve is used to illustrate cost opportunities that shows the trade-offs of choices we make. It lists opportunity costs by measuring maximum inputs of combinations which