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Microeconomics Assignment on Scarcity and Rationing

The document is an assignment by Mst Sumaiya Islam for the course Eco101 at North South University, discussing key economic concepts such as scarcity, opportunity cost, and rationing devices. It explains how scarcity influences decision-making and resource allocation, and outlines various rationing methods to manage limited resources during shortages. Additionally, it differentiates between positive and normative economics with examples relevant to economic policies and historical events.

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rahiyan.uddin
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10 views6 pages

Microeconomics Assignment on Scarcity and Rationing

The document is an assignment by Mst Sumaiya Islam for the course Eco101 at North South University, discussing key economic concepts such as scarcity, opportunity cost, and rationing devices. It explains how scarcity influences decision-making and resource allocation, and outlines various rationing methods to manage limited resources during shortages. Additionally, it differentiates between positive and normative economics with examples relevant to economic policies and historical events.

Uploaded by

rahiyan.uddin
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

North South Uni-

versity
Assignment No-1

Name: Mst Sumaiya Islam


ID: 221 2594 630
Course Code: Eco101
Section: 34
Course Title: Introduction to Microeconomics

Submitted to
Lecturer
DR. SIFAT ADIYA (SFY)
Department of Economics
North South University
1. No. we cannot live without scarcity because it seems unlikely that there would be a

scarcity of resources, such as food, water, and daily necessities, on the planet. Individuals

are constantly in need of more of these items than are offered. Because there aren't

enough resources, we have to be selective about what we use and how. It also has an

impact on how companies choose what to produce and how much to ask for. Therefore,

scarcity—the lack of enough of a desired item—influences how economies function and

how people make decisions.

2. The opportunity cost of taking the higher-paying job is the time you lose that you could

have spent on personal activities, like hanging out with friends, hobbies, or just relaxing.

Working long hours can make you feel stressed and tired, which might affect your

relationships and overall happiness. Basically, while you might earn more money, you

might miss out on important time for yourself and your loved ones.

3. The money you would have made from the part-time job is the opportunity cost of

choosing to study instead of working. This can have an effect on your long-term

objectives by possibly diminishing your current financial [Link] implies that you

may currently have less money. On the other hand, studying could help you learn more

and perform better on examinations, which could lead to better employment prospects in

the future. As a result, even though you now sacrifice some money, your education may

enable you to earn more in the future.


4. Rationing devices are ways to manage limited resources, like food or education. Here are

some common types:

Price Rationing: Prices increase when supplies are low, making it harder for some peo-

ple to buy essentials. For example, during a natural disaster, the cost of rice or bread

might go up, leaving those who can’t afford it without food.

First-Come, First-Served: Resources are given to those who arrive first. For instance, dur-

ing emergencies, food banks may distribute supplies, and people line up early to get food.

If you arrive late, there might not be any left.

Quotas: Limits are set on how many people can access certain resources, like university

spots in competitive programs. If you apply but the program is full, you can’t enroll, even

if you qualify.

During the pandemic, prices for items like flour and cooking oil rose, making them unaf-

fordable for some families.

I once tried to enroll in a popular class at my university, but there were limited spots. I

had to register right away or risk missing out.

In summary, while rationing devices help manage resources, they can also create difficul-

ties for those trying to access what they need.


5. To address shortages of essential goods like rice and clean drinking water caused by

floods, we can implement rationing devices such as:

Coupons or Vouchers: Distribute coupons or vouchers to households or individuals, specify-

ing how much of the essential goods they can purchase at subsidized prices or for free.

Ration Cards: Issue ration cards that allow people to buy a fixed quantity of the scarce goods

from designated distribution points. The amount could be based on family size or need.

Priority Lists: Create priority lists based on vulnerability or urgency, ensuring that those most

affected by the floods (like elderly or disabled individuals) receive their share first.

These rationing devices help ensure fair distribution of limited resources during emergencies,

preventing hoarding and ensuring that everyone has access to the essentials they need to sur-

vive and recover from the disaster.

6. Points A and B indicate productive efficiency as they lie on the PPF curve. This means

resources are being utilized optimally to produce rice and cars without waste. Whereas

point C indicates inefficiency (though it is attainable) as it is below the curve.

7.
8. An increase in the military equipment production capacity would cause the PPF to move

outward along the military equipment axis while the wheat production capacity remained

constant. This would create a new PPF that would represent increased military output at

the expense of perhaps decreasing overall efficiency.

9.

10.

a. Positive economics: This means looking at facts and data to see how an increase in

income tax affects economic growth. It's about studying what happens based on real

information.

b. Normative economics: This is about saying what the goal of government policies should

be. In this case, it's saying the main aim should be to make life better for the poorest and

most vulnerable people.


c. Positive economics: This is about explaining why the drop in home prices in 2008 and

2009 caused a global recession. It uses evidence and economic studies to show how one

thing (home prices falling) led to another (the recession).

d. Normative economics: This is when someone gives an opinion about how things were in

the US economy during the 1990s. It says income inequality got really bad, like it was a

disaster, based on their judgment.

e. Normative economics: This is about giving advice on what Bangladesh should do. It

suggests that Bangladesh should change from making textiles to making more technology

products. It's a suggestion based on what someone thinks would be a good idea for

Bangladesh's economy.

Common questions

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Rationing devices manage limited resources by ensuring equitable distribution and preventing hoarding. They include mechanisms like price rationing, quotas, and first-come, first-served systems. These devices become especially necessary during shortages, such as during natural disasters, to prioritize access based on factors like urgency or vulnerability, such as using ration cards or coupons to control supply and ensure those most in need receive essentials .

An increase in military equipment production capacity would shift the PPF outward along the military equipment axis. Although this increase reflects potential for higher military output, it may lead to decreased resource availability for other sectors, potentially diminishing overall efficiency. If resources are diverted from sectors like agriculture, this could affect the balance in the economy .

Scarcity influences individual decision-making and economic choices by necessitating prioritization and selective use of limited resources. Since resources like food and water are finite, individuals must choose how to allocate their time and money efficiently, which can involve making trade-offs. This scarcity also affects businesses in deciding what to produce and at what cost, as they aim to balance limited resources against consumer demand .

Normative economics involves value judgments and suggestions for policy action based on beliefs about what economic goals should be, such as advocating for policies that improve conditions for the poorest. Positive economics, on the other hand, relies on data and empirical evidence to explain economic phenomena, such as analyzing the impact of tax changes on growth rates. Both approaches influence policy-making, with normative economics often guiding the 'why' behind policy decisions while positive economics informs the 'how' .

The opportunity cost of taking a higher-paying job includes the loss of personal time that could be spent on leisure activities or with loved ones. This can lead to stress and a potential decline in relationships due to less availability for personal activities, ultimately affecting overall happiness despite the financial gain .

Shifts in production capacity as reflected by movements along a PPF indicate changes in a country's economic focus and resource allocation priorities. For instance, an increase in military production might reflect strategic emphasis on defense, potentially at the expense of consumer goods or other sectors. Such shifts illustrate the trade-offs inherent in strategic decisions, impacting long-term economic structure and growth potential .

The opportunity cost of choosing to study instead of working includes immediate losses in income that could affect current financial stability. However, the long-term economic prospects may be positive, as education can lead to better job opportunities, potentially increasing future earning potential. This trade-off underlines the importance of assessing both immediate and future benefits when making educational decisions .

Using positive economics, the global recession of 2008-2009 can be analyzed by examining empirical data and mechanisms, such as the housing market collapse leading to a decline in home prices, which in turn affected financial institutions and consumer wealth. This analysis uses concrete data and studies to understand causality, illustrating how the mortgage crisis and subsequent lack of consumer spending led to a broader economic downturn .

Priority lists as a rationing device can be highly effective during resource shortages as they ensure that those most vulnerable or in dire need, such as the elderly or disabled, receive essential resources first. This method prioritizes equitable distribution in emergency situations, helping to prevent inequity and ensuring the survival and recovery of the most affected individuals .

A Production Possibility Frontier (PPF) illustrates the efficiency of resource utilization by showing the maximum combination of goods that can be produced using all available resources efficiently. Points on the PPF, such as A and B, indicate productive efficiency where resources are fully utilized. Points inside the curve, like C, indicate inefficiency since more could be produced without additional resources .

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