Simple economics
Allocation of available economic resources such as land ,labour, people etc., production the combination different goods and services and exchange of goods and services to satisfy the collective wants Explained in the simple economics. But an economy is much more complex.
Let us now learn the fundamentel concern of the ecomomics :
Central problem of an economy
Any economic is basically based on production and consumption so scarcity of recources which leads to choice.
What to produce and quantity
how to produce by whom to produce and for whom it will be produced are the questions in the economy"?
Allocation of scare resources in an economics leads to combination of different mixes of all goods and services produced in economy.
Economing problem involve in the allocation of scare resources:
Unlimited wants: wants for goods (food, shelter, clothing etc)
limited resources are land,labour enterpreneure and so on.
Suppose wheat is produced by a farmer and if intead of some quantity of wheat farmer starts producing some sugercane then that unit of wheat farmer has to sacrifice for the prodution of sugarcane ,this is known as the opportunity cost.
The allocation of recouces of the collection of all possible combination of good and services produced with the available amount of recouces and technological knowledge is called as production possiblity set of economy and if it is dipicted on the graph it is known as prodution possibilty curve. The allocation of resources is done to reach the Economic efficiency in an economy.
Assumptions necessary to represent production possibility curve model a simple production possibility curve:
efficiency
fixed recources
fixed technology
two products
Economic efficiency are of different type:
allocative efficiency: It measure using the concept known as Pareto superiority(optimal)
Perato optimal where no person could be made better without infilicting harm on another.
Perato superior where benefit recevied by one is more then harm infilicting on another.
Technical efficiency:On a given level of output ,maximisation of cost or for a given level of cost maximisation of output.
full employment system:when all the recouces are used to its best outcome level is fully efficient level and fully employed.