Scarcity & Choices
What does the concept of scarcity mean in economics?
Unlimited wants, limited resources.
Name the four factors of production.
Land, labor, capital, entrepreneurship
Define opportunity cost.
The value of the next best alternative given up.
What does the Law of Demand state?
As price increases, quantity demanded decreases.
What type of economy is based on tradition and habit?
Traditional economy
What three basic questions must every society answer due to scarcity?
What to produce, how to produce, and for whom to produce.
Which factor of production refers to human skills and effort?
Labor
You can either study or watch a movie. If you choose the movie, what is your opportunity cost?
The benefits of studying.
What does the Law of Supply state?
As price increases, quantity supplied increases.
In a command economy, who decides what to produce?
The government.
True or False: Scarcity only affects poor nations.
False — it affects all nations
What type of capital includes tools, machines, and buildings?
Physical capital.
True or False: Trade-offs always involve money.
False — they can involve time or effort.
What is the point where supply and demand meet?
Equilibrium.
In a market economy, what determines prices and production?
Supply and demand.
What is the difference between a need and a want?
Needs are essential for survival; wants are not.
An idea for a new business is an example of which factor?
Entrepreneurship.
How does the Production Possibilities Curve (PPC) show opportunity cost?
It shows how producing more of one good leads to producing less of another.
What causes a surplus in a market?
When price is above equilibrium and supply exceeds demand.
The U.S. economy is a mix of which two systems?
Market and command (mixed economy).
How does scarcity force trade-offs in everyday decision-making?
It forces individuals and societies to prioritize choices because they can’t have everything.
Why is human capital valuable to a business?
It increases productivity and efficiency through training, education, and experience.
What happens to the PPC when new technology is introduced?
It shifts outward, showing economic growth.
Give a real-world example of a price ceiling and explain its effect.
Example: Rent control → causes shortages because demand exceeds supply.
Give one advantage and one disadvantage of a command economy.
Advantage: stability or equality; Disadvantage: lack of innovation and inefficiency.