Use the graph to illustrate the economic concepts of scarcit

Use the graph to illustrate the economic concepts of scarcity, unemployment, inefficiency, and opportunity costs. When possible, use data points on the graph to accompany your verbal explanation

Solution

No graph is provided, so I\'ll explain the concepts without the graph.

(a) Scarcity

The study of economics is absed on the concept of scarcity. This says that resources are scarce and not abundant, therefore each economic resource is priced based on their scarcity & availability and the consumers purchase goods based on the scarcity they experience.

(b) Unemployment

Unemployment arises when all the people seeking a job cannot get job. It is measured by the ratio of the number of employed people to the total number of workforce. Unemployment can be Frictional (persons seeking job in-between their jobs or fresh college graduates seeking job), cyclical (jobs laid off during economic recessions) or structural (caused by skill mismatch between skills required to fill the jobs as per current technology and skills possessed by workers).

(c) Inefficiency

Inefficiency signifies that scarce resources are not being fully utilized so that social welfare can be increased by higher utilization of one or more under-employed resources. An inefficient economic system generates zero social welfare loss (deadweight loss). In an inefficient system, some people can be made better-off without making other people worse-off.

(d) Opportunity costs (OC)

OC represents the lost benefit foregone by not choosing the next-best alternative. For example, consider a student who decides to undergo college for 2 years. If she didn\'t join college and worked instead, she could have earned $15,000 per year. So, $30,000 in 2 years of college education is the foregone earnings she could get if she didn\'t join college. So, opportunity cost of attending college is $30,000.