Scarcity and Choice / Opportunity Cost

• Scarcity– Combination of limited

economic resources and unlimited wants

• Allocate– To distribute scarce

resources in order to satisfy the greatest number of wants and needs

The 3 basic questions of economics:1. WHAT to produce?2. HOW to produce it?3. FOR WHOM to produce it?• Productivity– The level of output that results from a given level of

input (used to determine whether resources are being used wisely)

• Efficiency– The use of the smallest amount of resource to produce

the greatest amount of output.• Division of labor– Assigning a small number of tasks to each worker

1. WHAT to produce?2. HOW to produce it?3. FOR WHOM to produce it?• Productivity– The level of output that results from a given level of

input (used to determine whether resources are being used wisely)

• Efficiency– The use of the smallest amount of resource to produce

the greatest amount of output.• Division of labor– Assigning a small number of tasks to each worker

1. WHAT to produce?2. HOW to produce it?3. FOR WHOM to produce it?• Productivity– The level of output that results from a given level of

input (used to determine whether resources are being used wisely)

• Efficiency– The use of the smallest amount of resource to produce

the greatest amount of output.• Division of labor– Assigning a small number of tasks to each worker

• Trade-off– Sacrificing one thing for another

• Opportunity Cost– The value of what was given up in a trade-off

• Production Possibilities Curve– Shows all possible combinations of 2 goods or

services that can be produced in a certain time period

• 2 assumptions:1. Available resources and technology will not

change2. All factors of production are being used as

efficiently as possible

Inefficiency

Economic Growth

EXCHANGE

ExchangeProducers and consumers agree to provide

one type of item in return for another

TYPES OF EXCHANGEBarter

Exchanging one set of goods for anotherMoney

Any item that is readily accepted by people in return for goods and services

CreditAllows consumers to use items before completing

payment for the merchandise

ValueThe amount of money or price something is worth

UtilityThe usefulness to a person or consumer

satisfaction

Self-sufficiencyWhen people can fulfill all their needs without

outside assistanceInterdependence

Events or developments in one region of the world or sector of the economy influence events or developments in other regions or sectors.