1.1 Scarcity, Choice and Opportunity cost Flashcards
1
Q
What is the basic economic problem?
A
How to use the available resources to satisfy peoples infinite wants and needs as effectively as possible
2
Q
what is opportunity cost?
A
It is the value of the next best alternative forgone
3
Q
who is opportunity cost important to?
A
It is important to the economic agents - consumers, producers and governments
4
Q
what are the basic questions asked when allocating resources?
A
1) What to produce? - it is determined by what consumers prefer
2) How to produce it? - producers seek maximum profits and minimise production costs
3) Who to produce it for? - whoever has the greatest purchasing power in the economy
5
Q
what is ceteris paribus?
A
it assumes that all other things are held constant or are equal
