3.1.1.4 SCARCITY, CHOICE AND THE ALLOCATION OF RESOURCES
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15 Terms
Define fundamental economic problem
Limited resourced but unlimited needs and wants (have to make a choice - opportunity cost)
Define scarcity
When there is a limited resource that is unable to meet the demand (natural resources, land, capital)
Define choice
A decision that someone makes based on their needs
What is an opportunity cost?
The cost of the next best alternative forgone
What is the basic economic problem about?
Scarcity and choice
What is a trade off?
Choosing one thing that can only be achieved by giving up something else in exchange
3 examples of a trade off
housing (rent/buy a home)
working (full time/part time
transport and travel (euro tunnel/ferry/airline)
What is the cost benefit principle/analysis?
The costs and benefits of the decision made
What should you use in AO3 - analysis?
logical chains of reasoning
What does PECAN PIE stand for?
point
explained x3
contextualized
analysis
point
in
evaluation
What is an economic good?
Something which consumers have to pay for
What is a free good?
Beneficial for society - free (air)
What are the 3 aspects of a public good?
non-excludable
non-rivalrous
non-rejectable
What does regressive mean?
The policy effects the poorer people in society (sales taxes on necessities)
What does progressive mean?
The policy effects the richer people in society (income tax)
Note 
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