Questions and Answers
Which of the following best defines 'scarcity' in economics?
Needs are unlimited while wants are limited.
False
What defines opportunity cost?
The value of the next best alternative that is foregone.
The three main economic agents are individuals, firms, and the __________.
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Match the following terms with their definitions:
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What is the basic economic problem?
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Study Notes
Economics Overview
- Economics is a social science that examines human behavior regarding the management of limited resources amid unlimited wants.
Basic Economic Problem
- Exists due to unlimited wants contrasted with limited resources, resulting in scarcity.
Needs vs. Wants
-
Needs: Essential items required for survival, such as:
- Nutritional food
- Clean water
- Shelter
- Clothing
-
Wants: Non-essential goods and services that enhance quality of life, including:
- Mobile phones
- Other luxury items
- Wants are infinite, making them impossible to fully satisfy.
Economic Agents
- Three primary economic decision-makers in an economy:
- Individuals or households
- Firms (businesses)
- Government
Economic Problem Summary
- The fundamental economic issue can be stated as: Unlimited wants > Limited resources, leading to scarcity.
Opportunity Cost
- Due to the necessity of making choices between competing wants, opportunity cost emerges.
- Opportunity cost is defined as the value of the next best alternative that is sacrificed when a choice is made.
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Description
This quiz explores the fundamental concepts of economics, focusing on the basic economic problem of scarcity that arises from unlimited wants and limited resources. It differentiates between needs and wants, highlighting their importance to human survival and economic decision-making.
