1. Scarcity underlies the need for an economic system of any type. What is scarc
ID: 1140627 • Letter: 1
Question
1. Scarcity underlies the need for an economic system of any type. What is scarcity? Is it possible to ever eliminate scarcity? In what two ways could an economy try to eliminate scarcity? Will these attempts ever be successful?
2. Explain how adverse selection can arise in insurance markets. What role can the government paly - if any- to correct this situation? How does moral hazard give rise to a market failure?
3. In your own words, present your thoughts on the seeming trade-off between efficiency and equity. Consider whether this is a true trade-off, a misperception, or an avoidable problem that poor policy choices has given us. If it is a true trade-off, can steps be taken to minimize if? If available, should these steps be taken?
Please write thorougly and long enough that I can understand. And please answer all the questions that are in each problem set.
Explanation / Answer
1) Scarcity is the situation where humans are not able to fulfill their needs sufficiently. The resources are few in such conditions and people have to adjust in some way. Scarcity is hence the relationship between limited resources and unlimited wants of the humans and the problem that arises with these wants.
Due to the scarcity of goods, many economic problems will arise. But we should think about alternatives for our limited resources if we want to eliminate scarcity. This will allow usage of these goods to satisfy the people's needs and achieving happiness. An example is using the land for construction of buildings or either using it for making beautiful parks. Making parks provides maximum satisfaction for the people around it and hence scarcity can be somewhat eliminated. By doing such deeds we can attempt to reduce scarcity and in the future hopefully eliminate scarcity.
Also if humans choose to select few goods instead of their unlimited wants, it will reduce scarcity to an extent.
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