The economic problem

Question 1

What is the basic economic problem?

Answer 1

The basic economic prblem is that wants and needs are infinite but resources are finite.

Question 2

Define opportunity cost

Answer 2

Opportunity cost is the cost of the next best alternative forgone when a choice is made.

Question 3

What does a PPC/PPF show?

Answer 3

A PPC/PPF shows the maximum productive potential of an economy when all resources are fully and efficiently employed.

Question 4

What causes positive economic growth, aka the PPC to shift outwards?

Answer 4

• Technological advancements.
• Increases in the quantity or quality of resources (e.g., labor, capital).
• Improved education or training.
• Investment in infrastructure.

Question 5

What causes negative economic growth, aka the PPC to shift inwards?

Answer 5

• Natural disasters.
• War or political instability.
• Loss of resources (e.g., depletion of raw materials).
• Economic recession or a decline in productivity.