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Economics: Basic Economic Problem

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Questions and Answers

Which of the following best defines 'scarcity' in economics?

The cost of the next best alternative

The conflict between unlimited wants and limited resources (correct)

The ability to satisfy all wants

The government intervention in resource allocation

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 __________.

government Signup and view all the answers

Match the following terms with their definitions:

Needs = Essential goods and services for survival Wants = Goods and services that fulfill desires but are not necessary for survival Scarcity = The economic problem of having unlimited wants and limited resources Opportunity Cost = The value of the next best alternative forgone Signup and view all the answers

What is the basic economic problem?

Limited resources and unlimited wants Signup and view all the answers

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.