Daniel RodriguezDr. James ChaseECO 20231/27/2018Economics Assignment 2In this paper, we will be analyzing the three basic principles of economics as well as the basics of opportunity cost. We already understand that the basic economic problem is that resources are scarce and because of this people must make certain choices. Everyone has twenty-four hours throughout the day and we all choose how we spend our time differently. Opportunity cost plays a heavy role in determining which choices we make throughout the day.
Every time you make a choice there is a certain value that you put on that choice, every choice has value to you. The opportunity cost of a choice is a sacrifice in order to make that choice, each choice you make has values and each value has two components which are value and cost. As humans, we want to make the best economic decisions possible and in order to do that, we tend to make choices that have the most benefit to us with the least amount of cost. Let us create an example to amplify our understanding of this economic concept. Hypothetically speaking let’s say I just graduated high school and I am already in the job market and two different jobs become available to me. I can either work for Company A or Company B, Company A is offering to pay $20 an hour while Company B offers to pay only $10 an hour.
If we are looking at this scenario with just monetary value in mind than Company A would obviously bring us the most benefit but that is not how economics works and there are many more factors that could possibly come into play. Now that we have thoroughly discussed the basics of opportunity cost we can take a dive into the three basic principles of economics. To put it simply the three basic principles of economics are scarcity, efficiency, and scarcity. Scarcity helps to fuel the economy because things have no economic value if they are not scarce. Efficiency is important to economics because it helps to maintain sustainability in the economy, Economic efficiency refers to economic value relative to economic cost.
The greater the value relative to costs, the greater the efficiency. And lastly, sovereignty is a necessity to economics because if people do not have the freedom to choose what they want then the ideas of scarcity and efficiency have little to no value at all.