Economists define scarcity as the "limited quantities to meet unlimited wants."
All the decisions involve trade offs because we must give up some alternatives when we choose a certain course of action.
The term land refers to all natural resources that are used to produce goods and services.
Economists use the phrase "guns or butter" to describe the trade-offs a country has to make when choosing between military and the consumer production.
An opportunity cost is the most important sacrifice that results from making a decision.
A person who starts a new business or develops an original idea is known as an entrepreneur.
Underutilization of resources occurs when an economy uses fewer resources than it is capable of expending.
9. Using examples of land, labor, and capitol, explain why economists believe that all goods and services are scarce.
Goods and services are scarce to economists because there is not an unlimited amount of everything.
10. Explain how each of the following people would talk about scarcity and trade offs. a. The President of the United States: b. The leader of a developing nation: c. A U.S. citizen whose income is in the top percent: d .A U.S. citizen whose income is in the bottom 5 percent:
11. What three important pieces of information can we learn by reading a production possibilities graph?
You can determine mass employment, output, and efficiency
12. Explain the law of increasing costs. The Law of increasing costs says that as the production of the product increases, the cost to produce the an additional unit of that product increases as well.
Chapter 1 Assessment
9. Using examples of land, labor, and capitol, explain why economists believe that all goods and services are scarce.
Goods and services are scarce to economists because there is not an unlimited amount of everything.
10. Explain how each of the following people would talk about scarcity and trade offs.
a. The President of the United States:
b. The leader of a developing nation:
c. A U.S. citizen whose income is in the top percent:
d .A U.S. citizen whose income is in the bottom 5 percent:
11. What three important pieces of information can we learn by reading a production possibilities graph?
You can determine mass employment, output, and efficiency
12. Explain the law of increasing costs.
The Law of increasing costs says that as the production of the product increases, the cost to produce the an additional unit of that product increases as well.