Why Choices Matter: The Basics of Economics

Vocabulary flashcards defining fundamental concepts in economics including scarcity, factors of production, central economic problems, opportunity cost, types of economies, and social safety nets.

Scarcity

The basic economic problem that arises because resources are limited while human wants are unlimited.

Production

The economic activity referring to the creation of goods and services using resources such as labour, machines, and raw materials.

Distribution

The economic activity examining how income and resources are divided among individuals and groups.

Consumption

The economic activity referring to the use of goods and services to satisfy human wants.

What to Produce

The central economic problem of deciding which goods and services to produce and how much quantity to produce.

How to Produce

The central economic problem of choosing the method of production, specifically between labour-intensive and capital-intensive methods.

For Whom to Produce

The central economic problem of deciding how produced goods will be distributed among people in society.

Labour-Intensive Method

A production method utilizing more workers, which creates more jobs and is preferred in countries with cheap labour such as India.

Capital-Intensive Method

A production method utilizing more machines, which is preferred in developed countries and may reduce long-term costs.

Opportunity Cost

The value of the next best alternative that is given up when a choice is made.

Trade-Off

The act of giving up one thing to gain another during economic decision-making.

Market Economy

An economy where ownership is held by private individuals, decisions are made by market forces, government role is limited, and the primary objective is profit (e.g., USA).

Centrally Planned Economy

An economy where ownership and decision-making are controlled by the government, government role is very high, and the main objective is equality and welfare (e.g., North Korea).

Mixed Economy

An economy with shared ownership and decision-making between private individuals and the government, moderate government role, and the objective of growth with welfare (e.g., India).

Social Safety Nets

Government programs designed to protect vulnerable sections of society, including schemes like Public Distribution System (PDS), Mid-Day Meal Scheme, Right to Education, and Ayushman Bharat.

Welfare Economy

An economic approach focused on improving the well-being and quality of life of all citizens by reducing poverty, providing public goods, and ensuring social security.