Economics 101

Study Notes

Introduction to Economics: Scarcity, Opportunity Cost, Factors of Production, Specialization, Business Activity, and Added Value

Need refers to a good or service essential for living, while want refers to a good or service that is not necessary for survival.
Scarcity is the basic economic problem that arises due to unlimited wants and limited resources to produce goods and services.
Opportunity cost is the next best alternative forgone by choosing another item, which arises due to scarcity and the need to make choices.
Factors of production are resources required to produce goods and services, which are classified into four categories: land, labor, capital, and enterprise.
Specialization occurs when a person or organization concentrates on a task at which they are best, leading to advantages such as increased efficiency and skill development, but also disadvantages such as monotony and over-dependency.
Business is any organization that uses all the factors of production to create goods and services to satisfy human wants and needs, attempting to solve the problem of scarcity.
Added value is the difference between the cost of materials bought in and the selling price of the product, which businesses aim to increase by reducing the cost of production, raising prices, branding, adding special features, or providing premium services.
The reward for land is rent, for labor is wage/salary, for capital is interest received on the capital, and for enterprise is profit from the business.
To increase added value, businesses must consider the potential drawbacks of reducing the cost of production or raising prices, such as poor quality products or customer loss.
Scarcity leads to the need for choices, which in turn leads to opportunity cost.
Specialization can lead to increased efficiency and skill development, but also to monotony and over-dependency.
Businesses aim to solve the problem of scarcity by using all the factors of production to create goods and services that satisfy human wants and needs.

Description

Test your knowledge on the fundamental concepts of economics with this quiz on Scarcity, Opportunity Cost, Factors of Production, Specialization, Business Activity, and Added Value. Explore the basics of economics and learn about the resources required to produce goods and services, the advantages and disadvantages of specialization, the role of businesses in solving the problem of scarcity, and much more. See how much you know about the rewards for land, labor, capital, and enterprise, and the strategies businesses use to increase added value