General Terms and Definitions Flashcards
Define Economics
Economics is the study of solving the problem of how to allocate SCARCE RESOURCES so as to maximise SATISFACTION of consumers NEEDS and WANTS.
What conditions are needed for economics?
Scarcity/limited resources and unlimited wants.
What economic decisions are needed?
What to produce
What resources are to be used
How they are to be produced
Who is to get the goods
Define needs
Things individuals must have satisfied in order to sustain life.
What happens if needs are not met?
If your needs are not met, in the long term-you will die.
Wants
Desires individuals would like to have satisfied but are not necessary to sustain life. Wants are UNLIMITED.
Limited means(Scarcity)
The condition of limited resources relative to wants.
What is choice?
A decision between various alternatives when you have limited means.
Opportunity Cost
The next best alternative forgone when a decision is made. (the second ranked given up when a choice is made.)
Needs
Food Shelter Water Clothing
What are luxury goods?
Are goods we wan to have to make life better but not essential for our needs.
What are basic goods?
Are goods that are essential for our needs.
What are our limited means
Time, Money, Skill, Family.
