Topic 1: What is Economics Test Revision - Short Answer Questions Flashcards
What is a ‘free lunch’
A free lunch refers to a situation where there is no cost incurred by the individual receiving the goods or services being provided, but economists point out that even if something were truly free there is an opportunity cost in what is not taken
Why is there no such thing as a ‘free lunch’
This question describes the cost of decision-making and consumption. TINSTAAFL suggests that things that appear to be free will always have some hidden or implicit cost to someone, even if it is not the individual receiving the benefit.
Why are needs and wants unlimited and resources limited?
The economy has a finite amount of labour, capital, land, and entrepreneurship that it can use for production while people are never totally satisfied with the quantity and variety of goods and services they want/ consume.
Why is the study of ECON important?
- helps people become better citizens by helping us become better at making decisions
- Helps us understand how the world works
- Helps us understand how societies use scarce resources to produce valuable commodities and distribute them among different people
Describe the relationship between trade-offs and opportunity costs
Trade-offs are alternative choices we can make. Opportunity costs are choices that are the next best alternative to the good/service that is chosen
What factors are required for an economic resource to be considered scarce?
A resource to be considered scarce would be because that resource takes a lot of effort, money, time, or other resources to get, or because there seems to be a finite amount available.
In 2011, the wealth of Bill Gates was estimated at $56 billion, does he face the issue of scarcity?
The amount of money an individual has, even a resource-rich economy will face scarcity because resources aren’t going to last forever.
