Chapter 1 Basic Concepts in Economics

Question 1

What is opportunity cost ?

Answer 1

Opportunity cost is the highest-valued option forgone.

Question 2

What is scarcity ?

Answer 2

Scarcity refers to a situation in which resources are insufficient to satisfy all our wants.

Question 3

What does full cost involved ?

Answer 3

money cost and non-monetary cost (time, health, environment, option forgone)

Question 4

What is interest ?
(for borrower)

Answer 4

The cost of earlier availability of resources.

Question 5

What is interest ?
(for lender)

Answer 5

The compensation for deferring consumption.

Question 6

Does the existence of scarcity implies that human wants are unlimited ?

Answer 6

No, scarcity refers to the the situation where the resources is insufficient to satisfy our wants. If there is unlimited resources, scarcity will not occurs.

Question 7

Does the existence of scarcity implies that each and every economic good must have a market price ?

Answer 7

No, some free sample distributed on the streets are economic goods and does not have a market price.