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Understanding Scarcity, Choice, and Resource AllocationWelcome to our third ever blog in our economics masterclass. Today we will be going over and Understanding Scarcity, Choice, and Resource Allocation. [Section 1.4: Scarcity, Choice, and Allocation of Resources The basic economic problem stems from scarcity, where wants are unlimited, but resources are finite, necessitating choices. Optimal utilization and distribution of resources are crucial. For example, when you have only £1 to spend at a shop, you must choose between buying a chocolate bar or a packet of crisps due to the scarcity of money. This leads to the concept of opportunity cost, which is the value of the next best alternative foregone. The opportunity cost of choosing the crisps, in this case, would be the chocolate bar. Economic agents such as consumers, producers, and governments must consider opportunity costs when making decisions. Finite resources require careful allocation to achieve the best outcomes. This section leads on nicely to our first ever some what complex economic theory. Production Possibility Frontiers (PPFs) Production Possibility Frontiers (PPFs) depict the maximum productive potential of an economy by using a combination of two goods or services when resources are fully and efficiently employed. PPF curves illustrate the opportunity cost associated with using scarce resources. Below is an example of a PPF curve for Cheese and yoghurt (tradingview dot com /chart/AAPL/rNnd689O-PPC-GRAPH) An example could be, if milk is a scarce resource, there is a trade-off between producing more cheese or more yogurt from the milk. The PPF showcases the most efficient combinations of output (points A and B), where producing more yogurt incurs an opportunity cost of producing less cheese. The law of diminishing returns states that as more yogurt is produced, the opportunity cost in terms of lost cheese units increases. Points C and D on the PPF represent inefficient production, where resources are not fully utilized. Point E is currently unattainable with the existing resources. (tradingview dot com /chart/AAPL/YRb7mwU2-ppc-grpah-aks/) This PPF shows the opportunity cost of producing each product. Producing 100 units of cheese means that only 40 units of yoghurt can be produced instead of the potential of 90. Therefore, the opportunity cost is 90 - 40 = 50 units of yoghurt. The PPF not only illustrates opportunity costs but can also indicate economic growth or decline. Economic growth is depicted by an outward shift of the PPF curve, indicating an increase in the economy's productive potential. A decline in the economy is represented by an inward shift of the curve. Economic growth can be achieved by increasing the quantity or quality of resources, resulting in an outward shift of the PPF curve. Supply-side policies can facilitate this. Moving along the PPF incurs opportunity costs, while shifting the PPF curve outward reduces the opportunity cost of producing different goods. Productive efficiency is achieved when resources are utilized optimally along the PPF curve, while allocative efficiency involves the optimal distribution of goods in society. We have now covered every section for the first topic behind the A level spec for microeconomics! 4.1 Individuals, firms, markets and market failure ✅ 4.1.1.1 Economic methodology ✅ 4.1.1.2 The nature and purpose of economic activity ✅ 4.1.1.3 Economic resources ✅ 4.1.1.4 Scarcity, choice and the allocation of resources✅ 4.1.1.5 Production possibility diagrams✅
AMEX:SPYEducation
by CosmosTradingGroup
1
How to Trade to Win"Those who lose - trade not to lose. Those who are successful - trade to Win." Losing Vs Winning Most traders are more focused on not losing than they are on winning. Do you understand what this means? This means you are acting not in your best interest, but against your self. By focusing on how much you can or might lose, or on not losing, you increase the likelihood of making mistakes which ultimately lead to a losing traders equation, and a negative equity curve. Profitable traders do not care about losing. They understand it is part of winning. They focus on winning. What is the best move in this moment? Should I get out or continue to hold based on what the market is telling me? Winning traders accept the risk totally and completely; before getting into the trade. In other words, they have already lost what is on the line. Therefore they act in their own best interest, not based on their thoughts about what they could lose, but based on what the market is telling them to do in this moment. Other than this psychological difference, here are a few other key components on How to Trade To Win. Defined Edge - Every trader who is making money in the market has some form of edge which he employs. Even if his edge is purely intuitive. This is extreme and rare however, and most traders have clearly defined their edge and will only trade that edge. This removes randomness. Many beginners think they are going to study the market and be able to trade the market no matter what it is doing (trade intuitively). This is simply not the case for most. The purpose of studying the market is to identify opportunities in form of an edge. An edge is a setup or context which repeats itself over time. It might occur once a day, once a week, or once a month. It does not matter. All that matters is that you only trade your clearly defined edge, and leave the randomness behind. For more information, you can read about the edge I use in every market I trade. We also describe how you can develop your own edge, and trade it in any market. Stop Doing, Relax Efforts - If you are losing in the market, chances are you are doing too much. Many beginners, and even experienced traders think they must be trading in order to be a successful trader. This leads to random trading, over trading, and mistakes which compound themselves. You end up digging a hole, and instead of looking for a way out, you look for a different shovel. The harder you try to make a profit, the more you do, the more actions you make, and the more you lose. The market rewards those who are observant, disciplined, and most importantly patient. The market takes from those who try too hard, and do too much. If you dont believe me, try as hard as you can to make money, and see how you do! By relaxing your efforts, you relax your mind. In turn relax your actions and decision making. You do not have to trade every day to be a profitable trader. It sounds paradoxical doesn't it? How can I make money trading if I dont trade? By only trading when it is appropriate like when your edge is present, you better your odds of success. Profitable trading does not come from trading constantly. Profitable trading comes from the act of non-doing, and out of a state of emptiness. Profitable trading is effortless, it comes out of waiting for just the right moment before taking action. And then waiting some more while the market proves you right or wrong. Profitable trading is not forced; it just happens. Active VS Passive Trading - This is very similar to the previous topic. Active trading is a trader who is constantly in the market, trading whatever he see's or feels right. This trader is often wrong, and when he is right he makes the mistake of exiting too early due to fear. This leads to a negative traders equation as he continues to struggle to do the right thing. An Active Trader mentality is one which does not believe in "non-doing." He believes he must, and can, do something. He is afraid of missing out and is often swayed by thoughts and emotions. So he continues trading never looking back, and at the end of the month cannot figure out why his account is in the red. A Passive Trader is the opposite. He passes on more trades than he takes. He does not care about what he misses out on. He only cares about what he takes and the actions he makes in the market. He does not force trades, he just watches the market until he knows what to do. Or he waits and waits until his edge finally sets up. He is passive in his efforts, rather than active. He does not care if he doesn't trade today, this week, or even this month. Trading is not what is important to him; winning is. He knows that profits come from sitting, waiting. Because he is willing to wait, he is peaceful. And profits continue to come into his account, effortlessly. For more information on developing this type of mentality, see below. We also detail how to understand markets through price action, how to create, define, and employ an edge, and how to develop your traders mentality to succeed in markets. If you found this helpful please like! Feel free to comment or ask questions
Education
by tradersmentality
Research! Research! Research! I smell blood.I don't disagree with the notion that right now we are set up almost identical to the market in 2014. I don't disagree that we probably have a while longer before we see a bull run. But I am pretty confident we aren't going to see 2+ years of bear market and I don't think we will see a 2+ years of bull market after. I think what we are experiencing is the final days of true manipulation, the beginning days of true adoption, and a culmination of some really strong forces. The noise will continue, but the rise will be more steady. Let me explain... Maybe we haven't hit rock bottom but with the bulls crying their eyes out and people shorting so sure of themselves, I would say that it's a pretty good time for some or all to get wrekt. Think about it. There is a moment when you can make both animals cry. The minute of reversal where it's obvious that a massive gain is coming, but hasn't yet so the shorts get liquidated because of the lack of coverage. And then there are the bulls that so badly want something to moon, but in reality it's going to be a slow steady climb. Going back to the rate of adoption, think of the bell-curve that happens. No where in that curve is there a break. Adoption and price accelerate through about 1/3 of the total life cycle. There is however sometimes a chasm, much like the described perilous valley in the accepting of humanoid robots, that causes confusion before all of the early adopters get on board. The only thing there is to determine is how long the life of a cycle will be. In my last post I messed around with GDPs of five countries. I found at just one percent of their GDP in crypto-currency, the number is actually a little more than what the current market cap was listed at that day of 299B. In a perfect world right now we would see enough growth through adoption that we could take profits and new money coming in would offset the profit taking. But instead let's see what a macro story can tell us. Right now there just aren't enough retail stores taking crypto to make a difference but what happens when that threshold is crossed. 1. Some one buys something with crypto. 2. Price of crypto goes up due to fiat entering a market. 3. Amount of fiat in cirrculation goes down 4. No reason to sell crypto for fiat because enough retail to sustain oneself. 5. You get paid in crypto from work. 6. You buy more stuff gradually shifting more GDP to crypto. 6. Cycle repeats. This is what we should be striving for but due to where we are in this adoption cycle right now we are still ironing out wrinkles and people don't see a bigger picture. So Research, Research, Research! Prop up your own currency and figure out how you can make actual differences. Lastly, sniff around for the blood. Look at opposing views and see who is either scared or overly-confident. Just like bulls think the market will go up even in the short term, bears tend to think they will continue going down in the long term. Refer to my Buddhist approach to investing for inner peace if you seek the middle ground. ;-)
BITFINEX:BTCUSDEducation
by whiprush3
3