Module 2881 The Market System
This module provides an introduction as to why economic choices have to be made and how the market model operates. The subject content covers the basic principles of:
- why individuals, organisations and societies have to make choices;
- how competitive markets work;
- the objectives and competitive behaviour of firms and how explanations of market structure are used by economists to explain this behaviour.
Managing Scarce Resources
The main economic problem is scarce resources in relation to infinite wants. Everybody must make choices, in economics this is known as opporunity cost. Opportunity Cost: In decision making the next best alternative that could have been chosen. The opportunity cost thus leads to an important tool in economics that is Marginal analysis. Marginal analysis: An approach to economic decision making based on considering the additional(marginal) benefits and costs of a small change in behavior.