Understanding Economic Decision Making

Front

How do individuals and governments make economic decisions when scarcity is the basic economic problem?

Back

By prioritizing needs over wants and evaluating opportunity costs

Front

Explain how scarcity leads individuals and governments to make economic decisions.

Back

Scarcity forces choices to be made about how to allocate limited resources.

Front

Determine the trade-off and opportunity cost of choosing to spend time studying for an exam instead of going out with friends.

Back

The trade-off is better grades; the opportunity cost is time with friends.

Front

Compare marginal benefit to marginal cost when deciding whether to buy an additional cup of coffee.

Back

Marginal benefit is the enjoyment from drinking the coffee; marginal cost is the price of the coffee.

Front

Identify the sunk cost in the following scenario: You bought a non-refundable concert ticket for $50, but now you have a chance to work overtime for extra pay.

Back

The $50 spent on the ticket

Front

Apply marginal thinking to decide whether to study an extra hour for a test. Options: Consider the total time spent studying so far, Evaluate the additional knowledge gained from one more hour of study, Focus on the overall grade for the course, Ignore the potential benefits of extra study time

Back

Evaluate the additional knowledge gained from one more hour of study

Front

Analyze the role of competition in a market economy.

Back

Competition encourages efficiency and innovation.

Front

How does private ownership influence economic decisions in a market economy?

Back

It encourages individuals to invest and innovate.

Front

Compare the role of competition in a market economy to that in a command economy.

Back

Competition is limited in command economies due to government control.

Front

Evaluate the impact of the profit motive on resource allocation in different economic systems.

Back

The profit motive encourages efficient resource allocation in market economies.