The Basic Economic Problem

Podcast Beta

Play an AI-generated podcast conversation about this lesson

Questions and Answers

Which term best describes the basic economic problem?

Equilibrium

Scarcity (correct)

Efficiency

Abundance

What is the main reason why people must make choices in the face of the basic economic problem?

To allocate their scarce resources (correct)

To eliminate scarcity

To maximize their resources

To minimize their wants and needs

Which of the following questions does the basic economic problem force societies to answer?

Where to produce

When to produce

Why to produce

What to produce (correct)

What does the question 'How to produce' refer to in the context of the basic economic problem?

The decision about how efficiently to produce Signup and view all the answers

Which question does the basic economic problem not force societies to answer?

When to produce Signup and view all the answers

What does the question 'For whom to produce' refer to in the context of the basic economic problem?

The decision about who should consume Signup and view all the answers

What is the main concept underlying the basic economic problem?

Scarcity Signup and view all the answers

What does the basic economic problem create a situation where people must do?

Make choices about resource allocation Signup and view all the answers

What is the main purpose of answering the question 'What to produce' in response to the basic economic problem?

To satisfy unlimited wants and needs Signup and view all the answers

What is the main purpose of answering the question 'For whom to produce' in response to the basic economic problem?

To distribute goods and services Signup and view all the answers

Which of the following is the basis of a society's economic system?

The allocation of resources Signup and view all the answers

What is the basic economic problem?

Scarcity of resources Signup and view all the answers

What is the trade-off the farmer must make when choosing to grow wheat?

Using limited land and resources for other crops Signup and view all the answers

What is the opportunity cost of growing wheat for the farmer?

The value of the crops he could have grown differently Signup and view all the answers

Why is opportunity cost important in decision-making?

It helps individuals or firms make better decisions Signup and view all the answers

What are the three types of economic systems mentioned in the text?

Free market, mixed, planned Signup and view all the answers

What determines how resources are allocated in a society?

The answers to economic questions Signup and view all the answers

What is the value of the next best alternative that must be given up in order to choose a particular course of action called?

Opportunity cost Signup and view all the answers

What is the concept of giving up one thing in order to produce or consume another called?

Trade-off Signup and view all the answers

What must be weighed up against the costs of the next best alternative when making a choice?

Benefits Signup and view all the answers

Study Notes

Basic Economic Problem

The basic economic problem is the fundamental issue of scarcity, which forces societies to make choices about how to allocate limited resources to meet unlimited wants and needs.

Reasons for Making Choices

People must make choices because of the scarcity of resources, which means they cannot have everything they want.

Questions Raised by the Basic Economic Problem

The basic economic problem forces societies to answer three key questions: What to produce, How to produce, and For whom to produce.

Meaning of Key Questions

What to produce refers to the decision about which goods and services to produce.
How to produce refers to the decision about the methods and techniques to use in production.
For whom to produce refers to the decision about who will receive the goods and services produced.

Opportunity Cost

The basic economic problem creates a situation where people must make choices, which means giving up one thing to get another.
The trade-off the farmer must make when choosing to grow wheat is not growing another crop.
The opportunity cost of growing wheat is the value of the next best alternative that must be given up.
Opportunity cost is important in decision-making because it helps individuals and societies weigh the benefits of a choice against the costs of the next best alternative.

Economic Systems

The three types of economic systems mentioned in the text are not specified.
The basis of a society's economic system is how resources are allocated.

Resource Allocation

Resources are allocated based on the choices made in response to the basic economic problem.
The value of the next best alternative that must be given up is called the opportunity cost.
The concept of giving up one thing in order to produce or consume another is called opportunity cost.
When making a choice, the benefits of that choice must be weighed up against the costs of the next best alternative.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge on the basic economic problem with this interactive quiz! Learn about the fundamental concepts and principles behind this topic, and practice answering questions to enhance your understanding. Sharpen your skills and prepare for any upcoming assessments with this comprehensive quiz.