Chapter 1: Problem 1

Define the followingterms: a. scarcity b. opportunity cost c. economics d. want e. resource f. production possibilities frontier g. rationing device

Short Answer

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Scarcity refers to the limited availability of resources. Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. Economics is the study of resource allocation. A 'want' is a desire for a particular item. A resource is a factor used to provide goods or services. The production possibility frontier shows the maximum possible output combinations of two goods or services. A rationing device is a method to distribute goods and services when demand exceeds supply.

Step by step solution

Defining Scarcity

Scarcity refers to the basic economic problem of having human wants and needs that far exceed available resources. In other words, there are limited goods for unlimited wants.

Defining Opportunity Cost

Opportunity cost is the cost of foregoing the next best alternative when making a decision. It's the value of the opportunity lost, which could be understood as the benefit one could have received from an alternative choice.

Defining Economics

Economics is the social science that studies how individuals, governments, and nations make choices on allocating resources to satisfy their unlimited wants and needs, and how they manage and distribute these resources.

Defining Want

In the context of economics, a 'want' is a desire for a particular good or service. While needs are basic necessities like food and shelter, wants are things we would like to have, such as a new phone or a vacation.

Defining Resource

A resource, in economic terms, is any factor that can be used to produce goods and services that people want. Resources can be natural like water, or they can be human like labor, or they can be man-made like capital.

Defining Production Possibilities Frontier

The production possibility frontier (PPF) is a curve that shows the maximum achievable levels of two goods or services that can be produced while using available resources effectively and efficiently.

Defining Rationing Device

A rationing device is a method for distributing goods, resources, or services when demand exceeds supply. Examples of rationing devices include prices, first-come-first-serve, and lottery systems.

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