Scarcity, Choice and the Allocation of Resources

Descripción

A Levels (Unit 1, 1 The Economic problem) Economics Mapa Mental sobre Scarcity, Choice and the Allocation of Resources, creado por beth2384 el 26/10/2013.
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Mapa Mental por beth2384, actualizado hace más de 1 año
beth2384
Creado por beth2384 hace alrededor de 11 años
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Resumen del Recurso

Scarcity, Choice and the Allocation of Resources
  1. The world's resources are FINITE (limited)- i.e. there is a limited amount of land, water, oil on the planet
    1. Therefore, resources are SCARCE (insufficient supply to meet demand)
      1. Meaning economic agents (individuals, firms, governments) can only obtain limited amounts of resources at any time
        1. Scarce resources are called ECONOMIC GOODS
    2. Not all resources are scarce
      1. Resources which are NOT SCARCE are called FREE GOODS
        1. Examples: air
          1. Population pressures diminish the amount of free goods
      2. The basic economic problem
        1. INFINITE WANTS
          1. People have limited NEEDS which must be satisfied in order to survive
            1. People have unlimited WANTS because we always want more of something to improve living standards
            2. SCARCITY
              1. Resources are scarce but wants are infinite.
                1. This forces economic agents to make CHOICES and have to allocate scarce resources between competing uses
                  1. When a decision is made that affects the ALLOCATION OF RESOURCES, CHOICES are influenced by INCENTIVES (e.g. bribery)
              2. OPPORTUNITY COST
                1. CHOICES can be grade in terms of benefits gained from each alternative
                  1. One choice will be the 'best' so a rational economic agent will take that alternative
                    1. The benefit lost from the NEXT BEST ALTERNATIVE=OPPORTUNITY COST
                      1. Free goods have no opportunity cost
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