Introduction to Economics BU6007 S1 23-24 Workshop (1) - Limits, Alternatives, and Choices Quiz

Study Notes

Opportunity Cost and Decision Making

Opportunity cost refers to what is sacrificed to do or acquire something else.
Scarcity creates opportunity cost, and without scarcity, there would be no need to sacrifice one thing to acquire another.
Opportunity cost plays a crucial role in decision-making, helping individuals and businesses weigh the benefits and costs of each alternative.
Considering opportunity cost enables decision-makers to assess the potential benefits they would be sacrificing by choosing one option over another.

Utility and Purposeful Behavior

Utility refers to the pleasure, happiness, or satisfaction gained from engaging in an activity.
Utility is an important component of purposeful behavior, as people will allocate their scarce time, energy, and money to gain the most utility possible.

Budget Line and Opportunity Costs

Budget lines are always sloped downward, illustrating an inverse relationship between two goods.
The downward slope shows that as you increase one good, the other must decrease, representing the opportunity cost of the good you are getting more of.
Budget lines illustrate scarcity, as they show that you are limited by your income, and there is always a trade-off.

Economic Resources and Factors of Production

Economic resources are the natural, human, and manufactured inputs used to produce goods and services.
Resources are classified into four main categories: labor, land (natural resources), real capital, and entrepreneurs.
Resources are called factors of production because they are used to produce goods and services, and inputs because they go into a production process.

Production Possibilities Table and Curve

A production possibilities table shows the maximum amounts of two goods that can be produced, assuming the full use of available resources.
The production possibilities curve has a negative slope, indicating that to produce more of one product, we must do with less of another.
Inefficient use of resources is indicated by points below the curve, while unattainable combinations of goods are indicated by points above the curve.

Description

This quiz focuses on the concepts of opportunity cost, scarcity, and decision-making in economics. Students will explore how opportunity cost is related to the definition of economics and how it influences individual and business decisions.