SICAT, ROBIN V.

ASSIGNMENT # 3 JUNE 28, 2012

1.

EXPLAIN THE LAW OF SCARCITY

The law of scarcity explains that goods are scarce because there are not enough resources to produce all the goods that people want to consume. therefore, people People must make choices between different items because the resources necessary to fulfill their wants are limited. These decisions are made by giving up (trading off) one want to satisfy another.

2.

DIFFERENTIATE THE FOLLOWING ECONOMICS CLASSICAL ,

(1) CLASSICAL , (2) NEO-

(3) KEYNESIAN ECONOMICS

Classical economics suggests that the market will take care of itself. If we just leave the market alone it will correct itself. Adam Smith said that there is an invisible hand, which will move the markets toward their natural equilibrium, without requiring any outside intervention; it also assumes that prices are flexible on both in the case of goods and wages. It emphasizes in obtaining a maximum output f goods and services desired by consumers through prper balancing of resources. neoclassical economics is an approach to economics that focuses on supply and demand. It is the study of allocating scarce resources among competing uses or ends.It also assumes that individuals make rational decisions among competing outcomes, that firms seek to maximize profits while individuals maximize satisfaction or happiness, and that individuals act independently and possess complete, relevant information. On the other hand, Keynesian economics argue that the aggregate of labor markets is not self-correction. This theory argue also that full employment is a function of national income. It emphasizes on attaining and maintaining full employment.

3.

W HAT IS MONETARISM ? I S MONEY A RESOURCE OR A FACTORS OF PRODUCTION ?