StudyPlan - Chapter 2

People have​ ________ wants and​ ________ resources to deal with those wants.

unlimited; limited

______is the situation in which human wants always exceed what can be produced with the limited resources and time that nature makes available.... We use scarce​ resources, such​ as__________, __________,​ __________ and​ __________ capital, and​ __________, to produce economic goodslong dash—goods that are desired but are not directly obtainable from nature to the extent demanded or desired at a zero price. _____are unlimited. They include all material desires and all nonmaterial​ desires, such as​ love, affection,​ power, and prestige. The concept of ______ is difficult to define objectively for every person.​ Consequently, we simply consider every​ person's wants to be unlimited. In a world of ​scarcity, satisfaction of one want necessarily means nonsatisfaction of one or more other wants.

...Scarcity ...land; labor;​ physical; human; entrepreneurship ...wants ...need

Entrepreneurship is the component of human resources that performs the functions of​ organizing, managing, and assembling the other factors of production to create and operate business ventures... The factor of production that consists of factories and equipment used in​ production, as well as improvements to natural​ resources, is called...

...true ...physical capital.

Any activity that results in the conversion of resources into products that can be used in consumption is called

Production is defined as the conversion of resources into desired goods and services.

Scarcity is the same as a shortage.

False

Opportunity cost is best defined as_________alternative(s) that must be sacrificed to obtain something or to satisfy a want. Which of the following would least likely​ be, for the typical​ student, the opportunity cost of attending a class at​ 11:00 a.m.?... The opportunity cost of attending a class at​ 11:00 a.m. will likely differ from the opportunity cost of attending a class at​ 8:00 a.m. because ...

Next best (Opportunity cost is the​ highest-valued, next best alternative that must be sacrificed as a result of choosing some given alternative.) ...partying with a close circle of friends (The continual escalation of college costs​ has, unfortunately, made​ part-time work a necessity for most students.) ...a​ student's evaluation of any given set of alternatives is likely to be​ time-sensitive. & the number and variety of alternatives at 11 a.m. are likely to differ from those available at 8 a.m. (Not only is it likely that the number and variety of available alternatives will differ over​ time, but so too will the​ student's assessment of those alternatives vary with the clock.)

Why do economists avoid making the distinction between wants and needs​?

The term need is subjective making it difficult to distinguish between something someone wants and something they need. (People typically use the term need very casually in conversation. What they​ mean, usually, is that they want something that they currently do not have.)

Opportunity Cost

The​ highest-valued, next-best alternative that must be sacrificed to obtain something or to satisfy a want

DannyDanny goes to a militarymilitary academy to become a soldiersoldier. This is an example of

an investment in human capital. (Human capital is the accumulated training and education of workers. To acquire additional schooling is to invest in human capital. )

Many state governments claim a shortage of funds because there are​ "unmet needs." This claim is

false because of scarcity. (First of​ all, economists regard the term needs as too subjective. For​ example, what one voter may view as absolutely​ essential, another may see as frivolous. Economists instead prefer the term wants. These are all the things that would be purchased if incomes were unlimited. By definition all wants cannot be satisfied. It is thus perfectly accurate to speak of​ "unmet wants." To do so is to acknowledge the omnipresence of scarcity. This is clearly the meaning of someone bemoaning a shortage of funds​ (lack of tax​ revenue).)

Economic goods are

goods that are scarce (For many goods the desired quantity exceeds the quantity available at a zero price. These goods are therefore scarce and are called economic goods.)

You and a friend decide to spend​ $100 each on concert tickets. Each of you alternatively could have spent the​ $100 to purchase a​ textbook, a meal at a highly rated local​ restaurant, or several internet movie downloads. As you are on the way to the​ concert, your friend tells you that if she had not bought the concert​ ticket, she would have opted for a restaurant​ meal, and you reply that you otherwise would have downloaded several movies. The relevant opportunity costs for you and your friend of the concert tickets that you purchased are

internet movie downloads for you and a meal at a highly rated local restaurant for your friend.

Factors of production include

land, labor, physical​ capital, human capital and entrepreneurship (From the point of view of the​ economist, the combination of​ land, labor, physical​ capital, human capital and entrepreneurship will allow for the production of any good or service. This level of detail is sufficient to explain production behavior.)

Which of the following is not a factor of production

money. (While money is certainly needed to obtain factors of​ production, it is not a factor itself since it does not undergo a conversion into something that can be used in consumption)

Each individual must make choices because

resources are limited and therefore cannot satisfy​ one's many competing wants.

Scarcity

results from unlimited wants coupled with limited resources. (It is the mismatch between unlimited wants and limited resources that defines the problem of scarcity.)

The existence of scarcity requires

that people must make choices and face​ trade-offs in using their resources. (The clash between unlimited wants and limited resources​ (scarcity) implies that people must make choices regarding the use of resources. When one particular use for a resource is​ chosen, a​ trade-off occurs since production of the next best alternative is foregone.)

When an individual proclaims the need for a new​ car, the person typically means

they want something they currently do not have.

Economic goods are goods for which the quantity demanded exceeds the quantity supplied at a zero price.

true

Does the richest person in the world face the problem of​ scarcity?

​Yes, because even if you have money you will never be able to satisfy all of your wants and must therefore make choices. (Even the richest person on earth faces scarcity since this​ person's income, however​ large, is limited relative to her wants which​ are, by​ definition, unlimited. This​ person, like all​ others, must therefore make choices.)