Economy Impacted by Scarcity of Resources: Opportunity Cost - Essay Sample

Introduction

One of the most significant economic problems a country may experience is the scarcity of resources for processing plenty of products. Here, the production input tends to be lesser than the market demand (Barnet & Morse, 2013). Thus, economic activities are usually affected when products are in scarce since businesses are unable to make adequate profits. As a result, the manufactures opt to seek alternatives which, in turn, leads to the issue of opportunity costs. Opportunity costs refer to the value of a resource that is being given up when opting for an alternative (Barnet & Morse, 2013).

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This aspect is essential in an economical chain as it ensures that activities run smoothly by guaranteeing the efficient availability of resources (Breugelmans & Liu-Thompkins, 2017). Moreover, it is used in decision-making, especially concerning the plans of the business. Managers can analyze what resources they are short off and make alternatives to make sure that business operations do not stagnate.

Role of Profit and Loss in a Free Market

Profits and Losses are critical aspects in determining economic stability, particularly in a free market where stiff completion is expected. Profits imply the situation which a business' revenues is higher than its costs, whereas, loss refers to the vice versa (Breugelmans & Liu-Thompkins, 2017). They are relevant in determining the efficiency of entrepreneurship skills in businesses. They tell whether the economic attributes, such as capitalization and other inputs, were effectively incorporated to obtain returns (Barnet & Morse, 2013). Also, they motivate a better allocation of resources during production planning.

Is it Possible to Have an Economy Without Profit?

It is impossible for an economy without profit due to the increasingly stiff competition in the market. Most businesses are run under the principles of capitalism, where the primary objectives are to make high profits (Hinton & Maclurcan, 2019. Notably, companies operate under selfish interest in that each strives to attract the largest number of consumers (Hilton & Maclurcan, 2019). Even though capitalism results in inequality regarding socio-economic trends, it motivates most people in making profits to stabilize.

References

Barnett, H. J., & Morse, C. (2013). Scarcity and Growth: The economics of natural resource availability. RFF Press. Retrieved from https://www.taylorfrancis.com/books/9781315064185

Breugelmans, E., & Liu-Thompkins, Y. (2017). The effect of loyalty program expiration policy on consumer behavior. Marketing Letters, 28(4), 537-550. Retrieved from https://link.springer.com/article/10.1007/s11002-017-9438-1

Hinton, J. & Maclurcan D. (2019). A not-for-profit world beyond capitalism and economic growth? Organizing for the post-growth economy. Ephemera Journal. Retrieved from http://www.ephemerajournal.org/contribution/not-profit-world-beyond-capitalism-and-economic-growth