Status: Old
AACSB: Written and oral communication
2) Why do economists say that even very rich people face scarcity?
Answer: A person faces scarcity whenever his or her wants exceed what he or she can obtain using his or her resources. Even very rich people want things that they cannot have. An older rich person, for instance, might want to have all of his or her youthful energy, but medical science cannot (yet) provide this service. Alternatively, another rich person might enjoy life so much that he or she wants 25 hours in a day in order to have more time for more enjoyment. But, such a want is impossible. By way of another, perhaps more realistic example, Malcolm Forbes was the founder of Forbes magazine and was very rich. However, he did not win every piece of art that he bid upon at auctions. Even though Mr. Forbes was very rich, he still passed on some art when the price got so high that he thought given his resources, the price exceeded what he was willing to pay. Mr. Forbes wanted the art, but he was not willing to bid higher in order to win it. Mr. Forbes faced scarcity.
Topic: Scarcity
Skill: Level 3: Using models
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
3) What do economists mean when they discuss "scarcity"?
Answer: Scarcity occurs whenever people's wants exceed the ability of the available resources to meet these wants. Because people's wants are effectively infinite-it is always possible to imagine more good things to want to have-wants will always exceed what can be produced with the available resources, and so scarcity will always be present.
Topic: Scarcity
Skill: Level 2: Using definitions
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
4) Define economics and describe its branches of study.
Answer: Economics is the social science that studies the choices made by individuals, businesses, government, and entire societies as they cope with scarcity. It has two branches, microeconomics and macroeconomics. Microeconomics is the study of the choices made by individuals and businesses, the way they interact, and the influence that governments exert on these choices. Macroeconomics is the study of the aggregate (total) effects on the national economy and the global economy of the choices that individuals, businesses, and governments make.
Topic: Definition of economics
Skill: Level 2: Using definitions
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
5) Why does scarcity lead to the what, how, and for whom questions?
Answer: Human wants exceed the resources available to satisfy them, thereby creating the problem of scarcity of goods and services. Everyone wants more than he or she can have, be it a student dreaming of a faster computer or an extraordinarily rich business leader wishing for more vacation time. Because not all wants can be satisfied, people must make choices about which wants to satisfy. The choices resulting from scarcity mean that people must decide what gets produced, how are the products produced, and for whom are the products produced.
Topic: Scarcity and economic questions
Skill: Level 1: Definition
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
6) List and explain the three fundamental economic questions that must be answered by all economic systems.
Answer: First, all economic systems must answer the question of "what goods and services get produced and in what quantities?" In other words, among the near infinite types of goods and services, society must decide what will be produced and how much of each good and service will be produced. Next, every economic system must decide, "how are goods and services produced?" This question needs to be answered because there are always many ways to produce a particular good or service (for instance, using a lot of workers and only a little machinery, or a lot of machinery and fewer workers), so the method that will be used must be decided. Finally, once the goods and services are produced the society must decide "for whom are the various goods and services produced?" In other words, societies must decide whether the goods and services are distributed so that everyone gets about the same amount or whether they are distributed so that some people get more than others.
Topic: Economic questions
Skill: Level 1: Definition
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
7) Pumpkins are grown in New Mexico with the aid of fertilizer. Hence, fertilizer is a partial answer to which of the three economic question?