Scarcity in Economics: Understand the Concept Quiz and Flashcards

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Questions and Answers

What concept refers to the idea that individuals must give up some goods or services in order to obtain more of another good or service?

Opportunity cost

If a family decides to have a bigger house at the expense of having more acres of arable land, what economic principle is being illustrated?

Production possibility frontier

What is the main reason why individuals in society need to use limited resources efficiently?

To fulfill their needs due to resource scarcity

In the context of resource allocation, what must happen for a society to be balanced in its production and consumption of goods and services?

Match the production with collective consumption preferences Signup and view all the answers

Which economic concept implies that if a society collectively desires less of a good, resources could have been better used elsewhere?

Opportunity cost principle Signup and view all the answers

Why do individuals in society face the need to make trade-offs when allocating resources?

Due to the unlimited wants but limited resources Signup and view all the answers

What gives rise to the problem of choice in every society?

Scarcity of resources Signup and view all the answers

What does resource allocation refer to?

How much of which resource is devoted to the production of each good and service Signup and view all the answers

What is an essential consideration in deciding what goods and services a society will produce?

Resource constraints and trade-offs Signup and view all the answers

What does the production possibility frontier represent?

Trade-offs between different goods that can be produced Signup and view all the answers

What does the text imply by stating 'Whether to produce more of food, clothing, housing or to have more of luxury goods'?

Decisions need to be made on allocating resources between necessities and luxury goods Signup and view all the answers

Why must every society decide on how to use its scarce resources?

To manage resource scarcity and ensure efficient production Signup and view all the answers

What is one of the central problems faced by a society in terms of resource allocation?

Proper allocation of resources according to society's preferences Signup and view all the answers

Which concept refers to the challenge of deciding which goods and services to produce with limited resources?

Production possibility frontier Signup and view all the answers

What happens if a society wants more of a certain good but lacks the resources to produce it?

Production of other goods might be reduced to allocate more resources to the desired good Signup and view all the answers

What is an essential economic concern related to resource scarcity and allocation?

Properly allocating limited resources among various goods and services Signup and view all the answers

How are the basic economic problems faced by a society related to resource scarcity?

They involve proper allocation and distribution of scarce resources Signup and view all the answers

What challenges arise when a society has limited resources but unlimited wants?

Demand for certain goods may exceed available resources for their production Signup and view all the answers

Study Notes

Scarcity and Choice

Individuals face scarcity of resources, leading to the problem of choice in fulfilling their needs.
To obtain more of one good or service, one must give up some amount of another good or service.

Production and Consumption

The total amount of goods produced must match the total amount of goods that people want to consume.
If people do not want as much of a particular good as is produced, resources could be used to produce something else in high demand.

Allocation of Resources

Every society must decide how to use its scarce resources, as they have competing usages.
Allocation of resources determines how much of which resource is devoted to the production of each good and service.

Economic Problems

The problems of an economy can be summarized as:
- What to produce and in what quantities?
- How to allocate resources in production?
- How to distribute the final mix of goods and services?
These problems arise due to the scarcity of resources in comparison to the wants of the people in the society.

Basic Economic Activities

Production, exchange, and consumption of goods and services are among the basic economic activities of life.

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Concept of Scarcity in Economics