Scarcity & Choice
What is the most basic economic problem?
Scarcity (limited resources vs. unlimited wants)
Define "opportunity cost"
The value of the next best thing given up.
What is a "good"?
A tangible item that satisfies a need or want.
What does "economic cost" mean?
The value of the next best use of resources, not just money spent.
Define Microeconomics
study of individuals, households, and businesses
What do we call giving up on thing to get another?
Trade-off
If you spend $10 on a movie, what's the opportunity cost?
Whatever else you could have bought with that $10 (ex: lunch).
What is a "service"?
An intangible action performed for someone else.
What is the difference between intrinsic and subjective value?
intrinsic = value comes from the thing itself; subjective = value based on preference.
Define Macroeconomics
study of the economy as a whole.
In the desert island example, why can't you keep all 5 items?
Because of scarcity - you must make choices
What is the difference between opportunity cost and trade-off?
Trade-off = all options given up; opportunity cost = the single best alternative given up.
Which is this: haircut, pizza, iPhone, tutoring?
haircut/tutoring=service, Pizza/iPhone=goods
Why do economists reject intrinsic value?
Because value depends on what people are willing to pay, not inherent qualities.
Is this micro or macro: "inflation rises across the country"?
Macro
True or False: Scarcity only applies to poor countries.
False - scarcity affects everyone
Give a real-life example of opportunity cost for studying tonight.
Ex: time with friends, sports, video games, sleep.
What makes a good/service and economic good/service?
It is scarce and has a price.
Example: A diamond is expensive not because of rarity, but because people are willing to pay. Which concept is this?
subjective value
Difference between positive and normative economics?
Positive = facts (what is); Normative = opinions/values (what ought to be).
Explain how scarcity forces decision-making in your daily life.
ex: not enough time, money, or resources -> must prioritize.
Opportunity cost + Opportunity benefit -> given an example with buying a shirt.
cost = movie/snacks not bought; benefit = confidence/enjoyment of shirt.
Give an example of a free good/service. Why is it free?
Ex: air, sunlight -> because they are abundant and cost nothing.
Explain how economic cost applies to going to college.
it includes tuition AND lost wages from not working full time.
Classify:
1. The unemployment rate is 5%.
2. The government should raise minimum wage.
1. positive
2. normative