3.1.1.4 scarcity, choice and allocation Flashcards
what is the basic economic problem
there is limited resources and unlimited consumer demand, resources are being consumed faster than the planet can replace them
what is the definition of opportunity cost
the cost of the next best alternative that you give up when a choice is made
what is capital good
goods used in the production of other goods e.g an oven when making a cake
what is consumer good
goods consumed by individuals to satisfy their needs and wants
what is free good
a good which does not run out due to consumption, it is not scarce. e.g air and ideas
why does a free good have no opportunity cost
because you do not have to give it up, its supply is greater than demand
what is the definition of production
process/processes which turn inputs into outputs of goods
consumption
household expenditure on goods and services
what are the 3 agents in an economy
government
producers
consumers
what do consumers do in the economy
they decide what to buy and how much they are willing to pay for it
what do producers do in an economy
they decide what to make and how much to sell it for
what do then govenment do in an economy
they decide how much to intervene in the way producers and consumers act, eg they can set down laws.
