Scarcity, choice, opportunity cost Flashcards
What is the Fundamental Economic Problem?
Resources are scarce while people’s wants are unlimited.
What is Choice
Choice is when resources are so scarce that alternatives have to be considered
Why do choices exist?
Choice is when resources are so scarce because there are competing uses for these resources.
What are the Four Factors of Production?
Land, Labour, Enterprise and Capital
What is the relation of choice and opportunity cost?
Opportunity cost shows the real cost of choices made.
Why are wants unlimited?
it is likely that someone wants something else no matter the income.
What is Opportunity Cost?
The next best alternative forgone/the value of the choice not made.
What are the main allocative questions?
- What to Produce?
- How to Produce?
- For who to Produce?
What to Produce?
Economists cannot produce everything. Choices have to be made regarding what and how much of a product is made.
How to Produce?
Firms have to find the most efficient way to produce to maximise their benefit. But some methods have moral objections, eg using internationally sourced cheaper labour.
For whom to Produce?
Governments have to decide if everyone gets equal shares of products, or if some people get more than others. Like the redistribution of income.
