3. Scarcity Flashcards
Scarcity
When the demand for a good or service is greater than the availability of the good or service.
What is the economic problem?
resources have to be allocated between competing uses because wants are infinite but resources are scarce.
3 questions to ask to allocate resources
What goods and services should an economy produce?
How should goods and services be produced?
Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard?
NEEDS:
are the basic necessities that a person must have in order to survive
WANTS:
are the desire that people have
Factors of production
Land
Labor
Capital
Enterprise (Entrepreneurship)
Land
natural resources available for production
- renewable resources: those that replenish - non-renewable resources: cannot be replaced
labour
- physical and mental effort of people used in production
capital
- all non-natural (manufactured) resources that are used in the creation and production of other products
enterprise
- refers to the management, organization and planning of the other three factors of production
opportunity cost
the benefits of the next best alternative that are given up.
choice
They have to decide how to allocate their limited financial resources and so always need to choose between alternatives.
People wants are infinite; resources are finite, therefore, choices must be made.
free good
Does not incur any opportunity costs in its production or when consumed
Not relatively scarce (not limited in supply)
Will not have a price
economic good
Has an opportunity cost (goods that use resources which could have been put to use producing something else)
Uses scarce resources
Will have a price
Consumer goods
products sold to general public
consumer durable goods:
products that last a long time and can be used repeatedly
non-durable goods:
products that need to be consumed very shortly after purchase
Capital goods or Producer goods –
products purchased by other businesses to produce other goods and services
e.g. computers, machinery, tools
Services –
intangible products provided by businesses
e.g. teachers (education), doctors (health care)
non-renewable
resources resources, such as coal or oil, which once exploited cannot be replaced.
non-sustainable
resource a resource which that can be economically exploited in such as a way that its stock is being reduced over time. opportunity cost the benefits
renewable resources
resources, such as fish stocks or forests, that can be exploited over and over again because they have the potential to renew themselves.
scarce resources
resources that are limited in supply so that choices have to be made about their use.
working or circulating capital
resources that are in the production system waiting to be transformed into goods or other materials before being finally sold to the consumer.
