Scarcity And Choice Flashcards
What is opportunity cost?
Opportunity cost is the best alternative foregone when a choice is made. Example: the government building the Macroom bypass instead of more housing to address homelessness.
What is scarcity?
Scarcity refers to the gap between limited and unlimited resources.
What is an incentive?
An incentive is something that motivates an individual or firm to do behave in a certain way (the carrot approach).
What is a regulation?
A regulation is a law that must be followed. Violation of the regulation results in a punishment, e.g. a fine, a prison sentence, a ban. (The stick approach).
Do the government prefer to use an incentive or a regulation?
Governments prefer to use incentives to influence consumer and producer behaviour. Regulations result in a drain on resources like money.
What is specialisation of labour?
Specialisation of labour refers to the separation of the work process into a number of tasks carried out by a separate worker or groups of workers.
Advantages of specialisation of labour
- Workers are more productive as they get better/faster and more efficient at their assigned tasks. Total outputs are higher and so are profits.
- Training costs for the employer is cut as workers only need to carry out a narrow range of tasks.
Disadvantages of specialisation of labour
- For the individual worker, it allows little chance of career progression as no new skills are being developed.
- As the worker has a narrow range of skills, there is a possibility that they will struggle to find alternative employment.
What is the law of demand?
Law of demand is the negative relationship between price and quantity demanded on normal goods (e.g. chocolate). Generally, when the price of a good or service rise the quantity demanded falls and vice versa.
What is the law of supply?
The law of supply is a positive relationship between price and quantity supplied. If consumers are willing to pay high prices for a good/service, the supplier will probably try to increase availability if doing so is profitable.
What is a market?
A market is a place where buyers and sellers come together, and where the interaction of demand and supply occurs to determine a price. Example: a farmers market.
What is cost - benefit analysis
Costs and benefits of various options should be weighed up in order to make the best decision. Governments and firms often use this approach to help them make important decisions.
E.g. when considering whether or not to build a bypass the following: financial costs, external costs, external benefits, future projected costs and benefits.
What is microeconomics
Microeconomics analyses the behaviour/decisions of individuals and firms.
For example: when analysing unemployment in microeconomics, we would look at the factors that an individual would consider when deciding whether or not to apply for a job.
What is macroeconomics?
Macroeconomics studies the behaviour/decisions of governments and countries. It looks at the economy as a whole.
For example: when analysing unemployment in macroeconomics, we would look at a number of policies the government could pursue that would result in a fall in unemployment.
