scarcity as central economic problem

Question 1

define scarcity

Answer 1

scarcity refers to a situation where limited resources and insufficient to fulfil the unlimited wants and needs of society

limited resources: FOPs

Question 2

Scarcity implies that ___ have to be made in the allocation of resources between different uses

When choices are made, ____ and _____ are incurred

Answer 2

choices

trade-offs and opportunity costs

Question 3

define opp cost

Answer 3

value of the next best alternative forgone

Question 4

assumptions made for PPC curve (4)

Answer 4

ASSUMPTIONS:
1. All available resources are used to produce only 2 goods

2. Within the given time period, the quantity and quality of resources remain the same
3. Resources are fully and efficiently employed
4. Within time period, state of technology remains the same

Question 4

what is a PPC curve
and what can it be used to illustrate?

Answer 4

Production Possibility Curve (PPC) can be used to illustrate scarcity, choice, opportunity cost, productive efficiency, full employment, unemployment or under-utilisation of economic resources and changes in the productive capacity of an economy

The PPC is a curve that shows all possible combinations of the maximum quantity of two goods that a country can produce within a specified period of time with all its resources fully and efficiently employed at a given state of technology

Question 5

draw PPC curve and show what diff points and movements of curve mean

Answer 5

refer to Google doc

Question 6

what are the objectives of economic agents?

Answer 6

Objectives of rational economic agents:
Consumers aim to maximise utility (satisfaction)
Producers aim to maximise profits
Government aims to maximise societal welfare

Question 7

What is the Marginalist Principle

Answer 7

used to decide whether or not decision should be taken

States that an economic agent should pursue an activity up to the point where MB = MC