Economics of scarcity – BusinessMirror

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Scarcity is an economic concept that we encounter to solve a fundamental problem: the gap between limited resources and theoretically unlimited needs.

This situation forces people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible.

We must produce the maximum results with the scarce resources available.

That’s the message from Marikina representative Stella Quimbo during last weekend’s homecoming organized by the University of the Philippines School of Economics Alumni Association (UPSEAA).

Quimbo was our valedictorian of the 1991 UPSE batch with his Latin honor Summa Cum Laude. She then obtained her master’s and doctorate in economics at UPSE.

His research portfolio covered the areas of health economics, industrial organization, microeconomics, education, poverty and public policy.

She said we imbibed the “UPSE mindset” of how to think critically and strategically.

We have learned to choose the most effective option that benefits the most people without fear of challenging deeply held assumptions and proposing alternative solutions.

Quimbo voted against the controversial anti-terrorism law, saying it was against the laws of the land to give law enforcement so much power and discretion over who a “terrorist” really is. She said, “I cannot support a bill that contradicts the fundamental principles of the Constitution that protect our citizens.”

In general, economics is the study of scarcity and its implications for the use of resources, the production of goods and services, the growth of output and welfare over time, and a large variety of other complex issues of vital interest to society.

Economy is derived from the Greek word oikonomia, which in turn is made up of two words: “oikos,which translates to “household”; and “nemein” which translates best to “management and dispensation”.

Quimbo said many UPSE graduates would swear they barely remember what they learned in college.

We have read the book “The Wealth of Nations” by Adam Smith in which he argues for free trade, market competition and the morality of private enterprise.

On the other hand, Karl Marx disagreed because he argued that capitalism systematically benefits only a privileged few. Under the Marxist economic model, the ruling class enriches itself by extracting value from the cheap labor provided by the working class.

Marx favored government intervention. Economic decisions, he said, should not be made by producers and consumers and should instead be carefully managed by the state to ensure that everyone benefits.

One of the basic principles that I recall is the law of supply and demand, which is a theory that explains the interaction between the sellers of a resource and the buyers of this resource.

This theory defines the relationship between the price of a given good or product and people’s willingness to buy or sell it: when the price rises, people are willing to supply more and demand less, and vice versa when the price drops.

We have covered the relationships between variables, formulas and graphs. A variable is simply a quantity whose value can change. A graph is a graphical representation of the relationship between two or more variables.

UPSE was established in 1965 and is known for its graduates who have been vigorously trained and prepared to become leaders in various fields. Many of the key players in government, business, civil society and academia received their formal training in economics at UPSE.

One of them is former Vice President Leni Robredo of the Class of 1986, who was our guest speaker when I returned from my Class of 2016’s Silver Jubilee.

UPSE is also home to the economic officials of the current administration, namely Arsenio Balisacan as head of the National Economy and Development Authority, Benjamin Diokno as finance secretary and Felipe Medalla as governor of Bangko Sentral ng Pilipinas.

Economics wasn’t my first choice when I took the UP entrance exam in the mid-1980s, but another quota course, accounting.

I came to cherish this four-year undergraduate degree in economic theory, econometrics, and applied economics, involving a deluge of formulas and graphs.

I completed BS Economics in 1991 and then went on to UP College of Law.

Professor Winnie Monsod once asked me about the anecdote that economics graduates cross the street to pursue their legal studies because we make up a large portion of the candidates for the entrance exam to UP Law.

Quimbo gave a refresher on Pareto optimality: the state in which no other change in the economy can improve one person’s situation without at the same time making someone else’s situation worse.

Despite the divergence in pleas, the people of UPSE cheer as one community during the UAAP games with the slogan #UPFight.

Peyups is the nickname of UP. Atti. Dennis R. Gorecho heads the seafarers division of the law firm Sapalo Velez Bundang Bulilan. For comments, e-mail info@sapalovelez.comor call 09175025808 or 09088665786.

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