the fundamental economic problem Flashcards
What is the fundamental economic problem?
‘Scarce resources in relation to unlimited wants.’
This highlights the imbalance between limited resources and infinite human desires.
Define scarcity in economics.
The excess of human wants over what can actually be produced to fulfil these wants.
Scarcity drives the need for choice and prioritization in economic decision-making.
What are resources in the context of economics?
Inputs available for the production of goods and services.
Resources can include land, labor, capital, and entrepreneurship.
What are wants in economics?
Needs that are not always realised.
Wants can vary widely among individuals and cultures.
What underpins the concept of scarcity?
Choice.
Choices must be made by consumers, firms, and governments due to limited resources.
What does choice involve in economics?
Sacrifice.
Choosing one option often means forgoing another.
What is opportunity cost?
The sacrifice of alternatives in the production (or consumption) of a good.
It is expressed in terms of the best alternative that is forgone.
True or False: Opportunity cost is the cost of the second-best alternative.
True.
Opportunity cost represents the value of the next best option that is not chosen.
