Basic Economic Concepts

Wants
1. Human desires
2. Do not need to be backed up by purchasing power
3. Unlimited
4. When a want is satisfied, we develop other wants.
Resources
1. Limited in supply
2. Needed to produce goods and satisfy our wants
Scarcity
1. The amount of resources is insufficient to satisfy human wants
2. choice
  1. Opportunity Cost (OC)
    1. The highest-valued alternative forgone when making a choice
    2. We always choose the option that involves the lowest OC
    3. OC only changes when your highest-valued alternative forgone changes
    4. OC remains unchanged when there is a change in the value of the chose option
    5. =highest-valued alternative use of (money+time)
      1. OC changes when there is a change in the price
        $ is NOT the value of the chosen option --> what you pay, not a benefit received.
        Increase of price= increase of OC
        Sacrificing more alternative use of $
3. A universal problem
Goods
1. Economic Goods
  1. Quantity available is insufficient to satisfy all our wants
  2. OC is involved in obtaining it
  3. More of it is preferred
2. Free Goods
  1. Quantity available is sufficient to satisfy all our wants
  2. No OC is incurred when obtaining it.
  3. More of it is not preferred.
  4. ie. sea water, air
3. *Goods that are free of charge may be economic goods/ free goods
  1. Depends on whether scarce resources are required in obtaining the good, not on whether it is free of charge.

Resource summary

	Created by karenl about 10 years ago