Economics Quiz - 9 Key Concepts

Scarcity

Scarcity refers to the limited availability of economic resources in relation to society’s unlimited wants and needs. This makes economics based on the study of how to make the best possible use of scarce or limited resources to satisfy unlimited human desires.

Choice

As not all needs and wants can be satisfied, choices are forced to be made and gives rise to the concept of opportunity cost. In other words, Economic decision-makers continually make choices between competing alternatives, and economics studies the consequences of these choices, both present and future.

Efficiency

Efficiency is determined by the ratio of useful output to total input. Allocative efficiency refers to making the best possible use of scarce resources to produce goods and services that are optimum for society, thus minimizing resource waste.

Equity

Equity refers to the concept or idea of fairness, meaning different things to different people. In economics it is referred as inequality, which applies to distribution of income, wealth, or human opportunity. The degree to which markets versus governments should, or are able to, create greater equity or equality in an economy is an area of much debate.

Economic well-being

Economic well being is a multidimensional concept relating to the level of prosperity and quality of living standards. It includes present and future financial security, the ability to meet basic needs, the ability to maintain adequate income over the long term, and more. There are broad disparities in economic well being.

Sustainability

Sustainability in economics refers to the ability of the present generation to meet its needs without compromising the ability of future generations to meet their own needs. Where it refers to limiting the degree to which the current generation’s economic activities create harmful environmental outcomes that will negatively affect future generations.

Change

The economic world is in a continual state of change and economists must be aware and adapt their thinking accordingly. In economic theory, it investigates change from one situation to another. Empirically (real world), the world studied by economists is subject to continuous and profound change at institutional, technological, and economic levels.

Interdependence

All economic actors interact with each other within and, increasingly, across nations in order to achieve economic goals. The greater the level of interaction, the greater will be the degree of interdependence. In fact, decisions made by certain economic actors are likely to generate many, and often unintended, economic consequences for other actors.

Intervention

Usually refers to government involvement in the workings of markets. Failure to achieve certain societal goals such as equity, well being, and sustainability, in markets are considered sufficient reason for intervention. However, there are considerable debates about the merits of intervention versus the free market.