Economics and Finance
The United Kingdom won its bid for the 2012 Olympics. The 2012 London Olympics is expected to generate beneficial effects to the UK economy. In order to harvest the potential turnovers, studies must be undertaken to scrutinize the issues that might hinder the economic projections. These issues, further explained below, are composed of the basic economic problems facing every society. 1. Scarce Resources Resources are merchandise used in the production of goods and services, whereas scarcity is the condition of limited resources. A resource can be considered scarce if it cannot meet the needs.
Scarcity is directly relative with the supply and demand. Supply is the amount of goods that are either able or just willing to sell at a given price. Demand is the amount of good that consumers, based on their needs and wants, are willing and able to buy at a given price. If the demand is higher than the supply, more goods must be produced. Over time, this increased production will result to a problem, scarcity. Scarcity leads us to the allocation of resources, a topic that will be discussed in the later part of the assignment.
Due to the Olympic related constructions, most of the scarcity will be from the raw materials for construction materials like steel, aluminium, timber, plastic, and glass, resulting to the scarcity of the construction materials itself. 2. Opportunity Cost Opportunity cost is the cost of alternatives forgone as a result of a decision to carry out an action. Opportunity can either be a value (monetary) cost or time cost. Opportunity costs can come from decisions such as, working overtime, working over the weekends, choice of materials, equipments and amount of human resources.
Greater opportunity costs can come from choosing one project over another. Bigger companies will be more concentrated on big projects due to the Olympics. Therefore, small-scale companies now have the chance to take on bigger projects than they usually have. It’s up to them to weigh-out the opportunity cost of either accepting bigger projects or just staying within the limits of their comfort zone. 3. Price Mechanism Price mechanism is one way of regulating and allocating resources.
It is a way of matching up offers that market players bid and ask. A bid is an offer to pay a fix amount while an ask is an offer to sell for a fix amount. Price Mechanism The price mechanism is a circular flow wherein owners of the factors of production choose how much of their factors will supply to production, entrepreneurs choose the type and quantity of factors needed to supply goods at a certain price, while the consumers decide on the type and quantity of the goods they want at a certain price they’re willing to pay.
Price mechanism allocates factors to where they are most wanted and give more satisfaction to the society. It acts as a balance weighing up the needs of the society against the requirements of production. B. Problems with the Allocation of Scarce Resources As earlier stated, the 2012 Olympics will induce a high demand with resources, therefore resulting to a higher chance of scarcity. As a result, resources must be allocated carefully and properly. 1. Land Facilities must be built, therefore, land to be built on and land to get raw materials from will be highly affected.
London is a highly populated area, thus the sites must be cautiously chosen. From the 2012 Olympics official website, it is said that the Olympic Zone is to encompass a 2 sq. km. radius. A 2 sq. km. zone will eat up a large space that can be used for other buildings like housing. Considering the size, many would think that the space would just be wasted after the Olympics. But since the land to be used are existing waste and industrial land, the land will definitely be put into better use. 2. Labour Labour is a vital part in any company.
For companies with projects related with the olympics, the concentration of labour and the amount of applicants regarding the projects for the said event will be good news. Unfortunately, that results to bad news for smaller companies, and companies in other regions. Labour, from semi-skilled, skilled, technicians to professionals will be scarce due to the concentration of labour to the Olympics. Enterprises with no and or not enough manpower will be useless or will be producing low quality products. 3. Capital
Capital consists of equipment, plant, construction materials, machinery and other commodities needed for construction. If capital is to be scarce, the construction industry will suffer greatly. These increased demand, can be met by other means such as importation. C. Addressing the Consumption of Goods and Capital The consumption of goods and capital is highly dependent upon the supply and demand. Supply is the amount of goods that are either able or just willing to sell at a given price. Demand is the amount of good that consumers, based on their needs and wants, are willing and able to buy at a given price.