Allocation Of Resources Flashcards
1
Q
What is resource allocation
A
The way in which a societies productive assets are deployed across their alternative uses.
2
Q
Why is the allocation of resources so important?
A
Because everything is finite
3
Q
What assumptions do economists make about economic agents?
A
Economists assume the economic agents will act rationally
4
Q
What does a consumer acting rationally mean?
A
The household will set out to get the maximum amount of utility out of the activities relative to cost
5
Q
What does a firm acting rationally mean?
A
It means the firm will be assumed to want to maximise profits.
6
Q
What is an incentive?
A
Something that causes an economic agent to act, e.g a lower price will cause a consumer to buy that good.
