1.4 Scarcity, choice, and the allocation of resources Flashcards
1
Q
Why does scarcity occur?
A
Limited resources and unlimited wants.
2
Q
What is a ‘trade-off’?
A
Giving up a range of alternatives during an opertunity cost.
3
Q
How do economists assume people in an economy behave?
A
Rationally
4
Q
What does rationally mean?
A
Making decisions in self interest
Maximising their private benefit
5
Q
What factors may stop someone from making a rational decision? (5)
A
Lack of information
Emotion
Unduly influenced
Addiction
Loss averse (losses matter more than gains)
6
Q
What is a free good?
A
A good that doesn’t have an opportunity cost in consumption because it does not use up scarce resources.
7
Q
What is an economic good?
A
A good that has an opportunity cost in consumption because it uses up scarce resources.
