Scarcity & Trade-Offs
What is opportunity cost?
The next best thing you gave up.
“Big machine farms or small family farms?” Which question is this?
How to produce?
Decisions follow customs and elders; make what the group has always made.
Traditional economy.
Courts enforce contracts/property rights and the government keeps money stable, so prices/paychecks make sense.
In which system is this typical, and why does the government do it?
Mixed economy; role = protect & enable markets so people trust deals and money stays reliable, letting markets function.
Name one of the six economic goals
Any one: freedom, efficiency, equity, growth, security, stability.
What is a trade-off?
The choice you give up when you pick something else.
“City money: new buses or fix roads?” Which question is this?
What to produce?
Government planners set prices/wages and assign resources.
Command economy.
Pollution limits, food/medicine safety rules, and bans on child labor appear in which system, and why does government step in?
A: Mixed economy; role = regulate for safety & fairness to reduce harm when markets alone might fail.
Which goal focuses on personal choice (jobs, spending)?
Economic freedom.
What is scarcity?
Having limited resources and unlimited wants.
Which question asks about tools, workers, and methods?
How to produce?
Buyers and sellers decide; prices act as signals.
Market economy.
What are public goods, give one example, name the system, and say why markets under-provide them.
Goods/services everyone benefits from that are hard to charge individually (e.g., roads, libraries, sewers); typical of a mixed economy; markets under-provide because they can’t easily bill each user.
Which goal means using resources well with little waste?
Economic efficiency.
Why must societies prioritize what to produce?
Resources are limited, so not everything can be made.
Name the three fundamental economic questions.
What to produce? How to produce? Who gets it?
Some decisions by markets, some by government (rules & public goods).
Mixed economy.
How are many public goods/services paid for, and what trade-off does this create?
Taxes; trade-off: more services → higher taxes/less take-home pay.
Which goal is about a safety net for people in need?
Economic security.
Name two different ways societies can decide who gets goods.
Any two: price (pay to get), equal shares, first-come/first-served, or need-based.
“Equal shares, pay to get, need-based, or first-come?” Which question is this?
Who gets it?
Best at stability and security but slow to adopt new tech.
Traditional economy.
A city raises taxes to build and run a free public library for everyone. Name the government role, the economic system, and one reason government does this.
Role: Provide public goods & services; System: Mixed economy; Reason: Markets under-provide items that are hard to charge per user but benefit all (trade-off: higher taxes).
When taxes fund unemployment benefits, which goal improves and which may be reduced?
Security (and/or equity) improves; freedom (take-home pay) may be reduced.
A TikTok trend makes “Dragon Fire Chips” sell out. Stores raise the price, factories add a second shift, and next week the shelves are full again.
What two-word concept explains how prices and choices coordinate this?
Answer: Invisible hand or price signals