Scarcity & Trade-Offs
What is the basic economic problem faced by all societies?
Scarcity
Define opportunity cost.
The most desirable alternative given up when making a choice.
Name the 3 main factors of production.
Land, labor, capital.
What are the 3 basic economic questions?
What to produce? How to produce? For whom to produce?
Who wrote The Wealth of Nations and promoted free markets?
Adam Smith.
Choosing between two alternatives always involves what?
Trade-offs
On a PPC, what does a point inside the curve represent?
Underutilization of resources.
Give an example of physical capital.
Machinery, tools, or buildings.
In a traditional economy, decisions are based on what?
Customs, traditions, and roles.
Who promoted communism and collective ownership?
Karl Marx.
What is the difference between a need and a want?
A need is something essential for survival (e.g., food, water, shelter, medical care).
A want is something desired but not necessary for survival (e.g., video games, vacations, stylish clothes).
If you choose to study instead of going to a movie, what is the opportunity cost?
The enjoyment/experience of the movie.
What is human capital?
Skills and knowledge gained through education and experience.
Which type of economy is controlled by the government?
Command economy.
Which economist promoted government intervention during recessions?
John Maynard Keynes.
Explain why scarcity forces choices in economics.
Scarcity means resources are limited, but human wants are unlimited.
Because people can’t have everything they want, they must make choices about how to use their resources.
Every choice involves a trade-off, meaning something is given up to gain something else.
What does a PPC illustrate?
Trade-offs and opportunity costs of producing two goods.
What do entrepreneurs do?
Combine land, labor, and capital to create goods/services and take on risks.
Which type of economy encourages competition and consumer choice?
Market economy.
Which modern economist promoted free markets and limited government regulation?
Milton Friedman or Friedrich Hayek.
Give one real-world example of a trade-off you made this week.
Examples might include:
Choosing to study for a test instead of watching Netflix.
Spending money on gas instead of going out to eat.
Waking up early to exercise instead of sleeping longer.
What does it mean when the PPC shifts outward?
Economic growth (more resources or technology).
Which 18th-century economist suggested entrepreneurs should be considered a 4th factor of production?
Jean-Baptiste Say.
What type of economy is the U.S.?
Mixed economy (market-based with government regulation).
Name one recent change in the U.S. economy.
Examples: outsourcing, technology growth, service-based economy, globalization.