Scarcity & Choices
What is the central problem of economics?
Scarcity
Give one example of a need and one example of a want. (basics)
Need: water; Want: jewelry
Name the three main factors of production
Land, labor, capital
What is a trade-off?
Giving up one thing to gain another
What does a Production Possibilities Curve (PPC) show?
Trade-offs in resource use
Scarcity means having ______ resources and ______ wants.
Limited resources and unlimited wants
Goods are physical objects. What are services?
Actions people perform for others
What is the difference between human capital and physical capital?
Human capital = knowledge/skills; Physical capital = tools/buildings
If a country makes more military goods, it produces fewer consumer goods. Economists call this what?
Guns or butter
When resources are used to maximize production, the economy is operating on the ______
Production Possibilities Frontier
Name two ways early humans could deal with scarcity besides trade.
Do without, take by force, or find independently
Which is more essential for survival: needs or wants? Why?
Needs, because they are required for survival
Which factor of production includes natural resources like coal and water?
Land
What is the opportunity cost of spending time with friends instead of working
Lost wages or income
What is underutilization of resources?
Not using all available resources
Why is trade considered the most effective strategy to deal with scarcity?
It allows cooperation and mutual benefit
Give an example of a shortage and explain its cause.
Drought causing lack of crops
What role do entrepreneurs play in the economy?
Combine resources and take risks to create businesses
Explain marginal cost vs. marginal benefit.
Cost = what you give up; Benefit = what you gain
Name one factor that can cause the economy to grow
More workers or technology
Explain how specialization of labor increases the benefits of trade
Each group produces what they do best, creating surpluses to exchange
How can shortages be temporary or long-term? Give an example of each.
Temporary: holiday toy shortage; Long-term: drought
Why is entrepreneurship considered risky but important for economic growth?
Risk of failure, but creates innovation and jobs
Why is cost/benefit analysis important in decision making?
It helps compare options to maximize benefit
Explain how a PPC could shift outward.
Increase in resources or improved technology