4.1.1.4 Scarcity, choice & the allocation of resources

Question 1

What is the basic economic problem?

Answer 1

The issue of scarcity and choice in economics, – where there are unlimited wants and finite
resources, leading to decision-making by societies.

Question 2

What is scarcity?

Answer 2

Refers to the idea that resources are limited, and that choices must be made on how to allocate them.

Question 3

What is an opportunity cost?

Answer 3

The cost of the next best alternative foregone when a choice is made.

Question 4

What are four examples of opportunity costs?

Answer 4

1) Work-leisure choices : Lost wages foregone when choosing not to work extra hours
2) Government spending priorities : Investing in one sector may reduce the funds for another
3) Investing today for consumption tomorrow: Investing today for consumption tomorrow:
4) Utilising scare farm land : Investing today for consumption tomorrow:

Question 5

What are examples of the basic economic problem?

Answer 5

Millions of people making daily choices on transportation modes due to scarcity