Economics: Concepts of Scarcity and Choice

Needs

is necessities needed for basic human survival

Wants

is people desire certain types of goods or services to maximize their satisfaction

Scarcity

is a gap between limited resources and unlimited wants

Trade-off

economies must decide which goods and services to produce, how to produce them, and for whom they will be produced

Incentive

is something that motivates an individual or firm to behave in a certain way - it can be positive or negative

Regulation

is a rule or a law that must be followed and if it’s broken then a punishment or fine would be imposed.

Specialisation

is the focus on specific tasks or activities to increase efficiency and productivity by firm or individual

Production Possibility Frontier (PPF)

is an economic concept that shows the trade-offs or opportunity cost facing a firm or economy when faced with deciding how to allocate scarce resource

Name the three points on a PPF graph and define them?

• Efficient production point - the point of production where the firm or economy when faced with deciding how to allocate scarce resource

• Inefficient production point - to a point of production where the firm is not operating to full capacity and are wasting scarce resources

• Impossible production point - to a point of production where the firm cannot currently produce at given their scarce resource