Intro

Question 1

Relative Scarcity

Answer 1

The basic economic problem: where society’s unlimited wants and needs exceed limited available resources to satisfy them

Question 2

Needs

Answer 2

Items necessary for survival (e.g., food, water)

Question 3

Wants

Answer 3

Items not necessary for survival but that improve quality of life (e.g., snack foods, luxury items)

Question 4

Labor Resources

Answer 4

Human skills and talents used to produce g+s, normally in exchange for salaries (e.g., doctor)

Question 5

Capital Resources

Answer 5

Physical plant (investment) or equipment used to produce g+s (e.g., tractor)

Question 6

Natural Resources

Answer 6

Gifts of nature which occur without human interference, regarded as productive resources (e.g., minerals)

Question 7

Opportunity Cost

Answer 7

The value of production forgone when resources are allocated to their next best alternative use

Question 8

Production Possibility Frontier (PPF)

Answer 8

Shows all the different production possibilities if a nation were to allocate all their resources to producing to specific g+s. It displays efficiency, trade-offs and opportunity costs

Question 9

Trade-off

Answer 9

The benefits of resource allocation, being partly sent off though by the costs

Question 10

Productive Capacity

Answer 10

An economy’s physical limit or potential to produce g+s (GDP) when all resources are used to maximum efficiency

Question 11

Three basic economic questions

Answer 11

-“What and how much to produce?”
-“How to produce?”
-“For whom to produce?”