Foundations of Economics: Scarcity, Choice, Opportunity Cost, and Utility

Flashcards covering the foundational concepts of economics including scarcity, economic vs. free goods, choice, opportunity cost, total utility, and marginal utility.

What does scarcity mean in economics?

Scarcity means that there is not enough of something to satisfy everyone who wants it, requiring people to pay a price for it.

How is an economic good defined?

An economic good is defined as any good or service that has a price and is thus being rationed.

What is a free good in economics?

A free good is a good that is not scarce, has no price, and can be consumed in as much quantity as desired without paying.

Why are people forced to make choices when purchasing goods and services?

People must make choices because they do not have infinite incomes and must decide how to allocate their limited financial resources between alternatives.

What is the definition of opportunity cost?

Opportunity cost is simply what you give up in order to have something else.

What is the relationship between opportunity cost and economic goods?

If a good or service has an opportunity cost, it is relatively scarce, has a price, and is classified as an economic good.

Why do free goods not have an opportunity cost?

Free goods do not have an opportunity cost because they are not scarce and have no price.

What is utility in economics?

Utility is a measure of usefulness and pleasure a consumer receives when they consume a product.

What is total utility?

Total utility is the total satisfaction gained from consuming a certain quantity of a product.

What is marginal utility?

Marginal utility is the extra utility gained from consuming one more unit of a product.

What typically happens to marginal utility as consumption of a product increases?

In the majority of cases, the marginal utility gained from extra units of a product falls as consumption increases.