Guseva L.

PhD Zhukova O.S.

PhD Petrachkova O.S.

Donetsk State University of Management

Limit the productive capacity and priorities for the economy

Economics, then, is about the satisfaction of material wants. It is necessary to be quite clear about this; it is people’s wants rather than their needs which provide the motive for economic activity. We go to work in order to obtain income which will buy us the things we want rather the things we need. It is not possible to define 'need' in terms of any particular quantity of a commodity, because this would imply that a certain level of consumption is 'right' for an individual. Economists tend to avoid this kind of value judgment which tries to specify how much people ought to consume. It is assumed that individuals wish to enjoy as much well-being as possible, and if their consumption of food, clothing, entertainment, and other goods and services is less than the amount required to give them complete satisfaction they will want to have more of them.

If the recourses available to people are insufficient to satisfy all their wants, we say that such recourses are scarce. Scarcity is a relative concept; it relates the extent to people's wants to their ability to satisfy those wants. Neither people’s wants not their ability to produce goods nor are services constant. Their productive potential is increasing all the time, but so is their appetite for material things. Whether this increase in demands for more and better material satisfaction is in the nature of humankind of whether it is artificially stimulated by modern advertising is a subject much disputed at the present time.

Whatever the reason the fact it that we find ourselves in a situation of scarcity. We can not have all the things we want. The recourses available to satisfy our wants are, at any time, limited in supply. Our wants, however, appear to be limited. Thus, we all are in a position of having to make choices; we can only have more of X buy having less of Y. Our incomes are insufficient for us to buy all the things we would like to have. The individual with a limited income and unlimited wants is forced to exercise choice when he or she spends that income. Society as a whole faces a similar problem.

There is a limit to a country's productive capacity because the available supply of land, factories, machines, labour and other economic resources is limited. These economic resources have alternative uses; they can be used to produce many different kinds of goods and services. If some of these resources are committed to the production of one thing society mast forego the outputs of the other things which it might have produced. For example, if we commit resources to the building of houses then the real cost of these houses is the potential output of schools, shops, office blocks or theatres which has been scarified in order to produce houses.

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