Scarcity, choice and opportunity cost

Question 1

fundamental economic problem

Answer 1

scarce resources but unlimited wants: sometimes called the basic economic problem.

Question 2

resources

Answer 2

inputs available for the production of goods and services.

Question 3

wants

Answer 3

the goods and services that people may like to have but are not always required.

Question 4

needs

Answer 4

necessary things for survival, such as food.

Question 5

scarcity

Answer 5

a situation in which wants and needs are greater than the resources available.

Question 6

choice

Answer 6

resources are scarce so individuals, firms and governments have to consider alternatives.

Question 7

factors of production

Answer 7

resources or inputs available in an economy that are used in the production of goods and services.

Question 8

firm

Answer 8

any business that hires FOP’s to produce goods and services.

Question 9

opportunity cost

Answer 9

the cost expressed in terms of the next best alternative that is foregone when a choice is made.

Question 10

the fundamental economic problem leads to what 3 questions?

Answer 10

What to produce?
How to produce?
For whom to produce?

Question 11

What to produce?

Answer 11

Economies cannot produce everything, so they must decide what to produce and in what quantities. e.g. firms and governments have to choose whether to produce lots of goods and services such as food or whether produce military equipment.

Question 12

How to produce?

Answer 12

Firms have to consider how resources are used so that they achieve the best outcome. Firms need to consider how they can get the maximum use out of the resources available.

Question 13

For whom to produce?

Answer 13

Governments have to decide whether everyone is going to have a more or less equal share of what is produced or whether some will have more than others.