Scarcity, choice and the allocation of resources

Question 1

Definition of Economics

Answer 1

The world’s scarce resources vs human’s infinite wants

Question 2

What is the economic problem

Answer 2

People have unlimited wants

However, there aren’t enough resources available to supply all of these wants

This creates the economic problem of scarcity

Question 3

Definition of opportunity cost

Answer 3

The benefit lost of the next best alternative when making a choice.

Question 4

Definition of trade-offs

Answer 4

All of the opportunity costs of multiple alternatives that have been given up.

Question 5

What do production possibly diagrams illustrate?

Answer 5

Features of the fundamental economic problem,

-Resource allocation
-Opportunity cost and trade-offs,
-unemployment of economic resources
-Economic growth

Question 6

What does PPC stand for

Answer 6

Production Possibility Curve

Question 7

What can the PPC be used to show

Answer 7

Concepts of trade-offs and conflicting objectives
-There is a choice as to how we utilise resources.

Question 8

When does allocative efficiency occur?

Answer 8

When social welfare is maximised.