We have learned that costs occur because there are constraints. Consider this. A

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We have learned that costs occur because there are constraints. Consider this. As you are reading this section of the book, you are unable to use the time to do something else like, say, going to a movie. There are only 24 hours in your day, and a movie does not fit into that schedule given that you have to study and do lots of other things. You could do so much more if the day were 26 hours, even more if the day were 36 hours, and an infinite amount of things if the day (and your personal capacity) were infinitely long. In this situation, opportunity cost is hardly a consideration – you dont have to give anything up during the day because the day is long enough for all things including that movie. The reality is that your day is limited, and in general, resources are also limited in the economy at the present moment. This implies that an economy and people within who use the resources are constrained in their ability to satisfy certain wants without incurring the opportunity cost of forgoing other wants. Whats worse is that that the opportunity costs of choice may appear to rise in future years because the resources at our disposal may dwindle as they are consumed. Economics has been called the dismal science because of this awful scenario. However, the scenario is infrequently taught by economists but more often taught by many scientists. Those scientists have become accountants of the earth that watch a growing population extract such things as oil, minerals, soil, forests, clean air, water, etc. from the balance sheet of resources. Economics What You Need to Know: 13 Accounting certainly has merit. But, the accountants do simple arithmetic without looking beyond the present balance sheet. Todays balances do not necessarily represent future limitations. Present constraints are potentially overcome by peoples ability to solve the challenges before them. Minds are very active when there are enough incentives to discover, invent, innovate and develop. Sometimes the incentive is personal satisfaction from intellectual achievement. Often the incentive is profit. The industrial revolution of the 19th century and the technological boom of recent decades are but two periods where resource potential expanded due to incentives. For example the technological boom witnessed the development of fast microprocessors and their exponential ability to gather and analyze information on new ways to reconfigure resources in production. We have witnessed productivity increases – labor working along-side the other three resources producing greater amounts of goods and services per capita. In other words, improved technical efficiency decreased the marginal cost of production. Although constraints will never completely vanish, motivated human minds continue to search for ways to alleviate constraints, reduce opportunity costs of production, and as a result, change the accountants ledger for the better. Incentives drive people to do what they might not otherwise consider doing. Olympic athletes thirsting for a gold medal regularly set new world records in their events. Immigrants seeking better lives for their families often sneak across borders in the middle night to enter wealthy countries in search of work. Students with poor high school credentials but wanting better overcome many hurdles in community colleges to eventually transfer to major universities. Incentives drive entrepreneurs, too. Many work 80 hours per week, mortgage their homes for seed money, and develop new products that eventually earn them wealth. Not all succeed but some do, and many of us receive the unintended consequences of their efforts. Yes, its true! Entrepreneurs create companies that employ people and sell products to customers. But, these good things are really the unintended consequences of the entrepreneurs actions. The entrepreneurs intended consequences likely are Economics What You Need to Know: 14 centered about money, power, and personal satisfaction. In process, we benefit as well.

Can you help me? bring out what is important in this passage and explain it. thanks!

Explanation / Answer

There are two different passage in the above text.

The second paragraph of the text somewhat contradicts the previous one.

IN first paragraph, a concept of economic has been explained. Thtat is limied resources. Economics is a study of allocating resources to alternate wants. But wh it is necessary to allocate resources. The answer lies in the fact that resources are limited and wants are unlimited. Hence because of scarce resources, the constraint arises to fullfill all wants. Few example are given such as in 24 hours we can allocate 2 hours of idle time either for watching a movie or for a reading. Time is a resource here that is limited and hence both the wants (reading a book and wathcinhg TV ) can not be fulfilled.

IN additiion it has also sad that at presenet time we have reources that we use and will get perish and will no onger will be available for future generations. Such as oil, coal etc hence we create problem ogf growing scarcity of resources also.

In the second paragraph, entrepreneurship has been suggested as a solution to the growing scarcity problem idiscussed in first paragraph. As time move, we are having increment in intellects, innovation and entrepreneurship that helps in redcuing cost and hence somewhat solving problem of growing scarcity of resources.

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