Discuss Want and Scarcity with importance of them and also discuss how does a private sector firm maximize its profits

Q7. Explain the terms “Want” and “Scarcity” as understood in Economics (Nov’08,’11).

Wants: Want may be defined as an insatiable desire or need by human beings to own goods or services that give satisfaction. The basic needs of man include; food, housing and clothing. Human needs are many.

They include tangible goods like houses, cars, chairs, television set, radio, etc. while the others are in form of services, e.g. tailoring, carpentary, medical, etc. Human wants and needs are many and are usually described as insatiable because the means of satisfying them are limited or scarce.

Scarcity: Scarcity can be defined as a situation in which human wants are greater than the capacity of available resources to provide for those wants. In other words, it means that people want more than is available. Economic resources are limited, but human needs and wants are infinite. Indeed the development of society can be described as the uncovering of new wants and needs - which producers attempt to supply by using the available factors of production.

Making choices Because of scarcity, choices have to be made on a daily basis by all consumers, firms and governments.

Q8. Discuss the importance of multiplicity of wants and scarcity of resources in the study of Economics (Nov’08 and Nov’11).

Q9. How does a private sector firm maximize its profits (Nov’08, Nov’09, May’07, and May’08)?

In economics, profit maximization is the short run or long run process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue–total cost perspective relies on the fact that profit equals revenue minus cost and focuses on maximizing this difference, and the marginal revenue–marginal cost perspective is based on the fact that total profit reaches its maximum point where marginal revenue equals marginal cost.

The proprietors of those private firms, treat their staff professionally Provide a conductive working environments for their staff to work in comfort. Regard their marketing departments and their sales persons as important personnel, to bring in business for the various departments of their firms to process and turn those business and services into finished goods or services to sell or provide to their customers so that profits can be made.