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Economics > Scarcity / Choice / Opportunity Cost > Flashcards

Scarcity / Choice / Opportunity Cost Flashcards

1
Q

What are some BASIC economic concepts?

A

scarcity exists

choices MUST be made

rationing system

scarcity = value

consumer surplus

equity v. efficiency

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2
Q

What is scarcity?

A

when a resource is limited in supply & demand/ something that is in limited quantity but desired

therefore, scarcity is a function of supply & demand, so if demand is high relative to supply, the resource is then scarce

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3
Q

Why must choices be made?

A

because scarcity exists choices must be made for the best allocation

choose between competing systems

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4
Q

What are rationing systems?

A

the system decided on how to manage the scarcity

e.g. lottery
first come first serve
merit-based

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5
Q

What is the relationship between scarcity and value?

A

something that is scarce is valuable

therefore, scarcity = value = utility

also depends on situation, location & conveniency

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6
Q

What is consumer surplus?

A

is the difference btw what a person is willing to pay and the actual price

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7
Q

What is the difference btw equity and efficiency?

A 
equity = fairness
efficiency = most socially optimal use

what is equitable may not always be most efficient & vice virsa

e.g. lottery = fair chance but not efficient
auction = not fair but efficient

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8
Q

What is economics then?

A

economics is the study of choices leading to the best possible use of scare resources in order to best satisfy unlimited human needs and wants

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9
Q

Can you explain the diamond/water paradox?

A

first start with paradox. Paradox = contradictory statement that may be true

margin / marginal = next
demand = marginal benefit (MB) / value of one more

as # of smt increases, MB always decreases

supply = marginal cost (MC) / $ to make 1 more unit

cost DOES NOT EQUAL price
cost = how much $ business used to make unit
price = what consumers pay

Price = is the intersection of supply & demand

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10
Q

What are the 3 basic economic Qs?

A

What to produce?

How to produce?

For whom to produce?

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11
Q

What are the types of goods and which economic Q do they answer?

A

What to produce?

capital

consumer

durale

in/non-durable

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12
Q

What are capital goods?

A

goods used to produce other goods

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13
Q

What are consumer goods?

A

final product

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14
Q

What are durable goods?

A

a good that lasts for > 3 years

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15
Q

What are non-durable goods?

A

a good that lasts < 3 years

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16
Q

What are the What & How Qs classified under?

A

resource allocation

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17
Q

What are resource allocation terms?

A

re allocation

overallocation

underallocation

18
Q

What does reallocation mean?

A

if a decision made has to be modified bc of a change in amount of goods

19
Q

What is overallocation?

A

smt with wrong amounts produces, relative to what is socially desired

20
Q

What is underallocation?

A

too few desired goods/services produced

21
Q

What is the For Whom Q classified under?

A

distribution of output & input

needs to target audience wants / likes / interests
just for ourselves & trade

22
Q

What is output?

A

who is receiving goods

23
Q

What is input?

A

who is getting $

24
Q

What is the relationship between output & input?

A

peoples output depend on their income

25
Q

What is redistribution of income?

A

when distribution of O & I changes drastically in social groups

26
Q

What are the factors of production?

A

Land / natural

Labour

Capital (physical)

Entrepreneurship (management)

27
Q

What are land production factors?

A

gifts of nature

includes all agricultural and non-agricultural land

all nature under and over

28
Q

What are labour production factors?

A

all forms of human input (mental & physical)

limited to #s & skill

29
Q

What are capital production factors?

A

manmade factor of production used to produce goods / services

30
Q

What are entreprenuership factors of production?

A

ability to innovate / take risks / seek opportunities

organises the other 3 factors

31
Q

What is utility?

A

satisfaction derived from the consumption of goods & services

32
Q

What is opportunity cost?

A

value of next best alternative not taken that must be sacrificed to obtain smt else

33
Q

What are the 4 key components of opportunity cost?

A

several alternatives available

choice must be made

decision maker limited to choices - ‘time & space’ defined NO TOMORROW

34
Q

What are some generalisations made in regard to opportunity cost?

A

choosing is refusing

people’s values differ

people cannot escape opportunity cost

35
Q

What does TNSTAAFL stand for?

A

There is NO Such Thing As A Free Lunch

everything in life as an associated cost

36
Q

What is the difference btw explicit and implicit costs?

A

explicit = bills, pay, save etc.

implicit = emotional, physical, etc.

37
Q

What does the Production Possibilities Curve / Frontier (PPC / F) show?

A

it shows different combinations of 2 goods that can be produced

= efficiency + NO WASTE

38
Q

What are production possibilites?

A

different combinations of 2 goods that can be produced using full resource employment

39
Q

What is the law of increasing opportunity cost?

A

when ALL RESOURCES are being USED and INCREASE IN PRODUCTION of 1 good will = INCREASED FORGONE production of OTHER GOOD

40
Q

What are the types of PPC curves and why?

A

linear / constant opportunity cost
= conditions to produce goods are similar

curve / increasing opportunity cost
= conditions to produce goods are different

41
Q

What are the PPC shifters?

A

faster computers & tech = increase

destruction of power plant = decrease

increased unemployment = same (NOT DEAD)

increased education = increase

42
Q

What are some key concepts for PPC?

A

scarcity

actual output - where it is on the PPC

potential output - point of PPC @ a particular time

economic growth / development - increase in quantity / quality of resources + nation’s output will determine standards of life

Economics (7 decks)

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