GK - Economics 1

What is economics?

• The study of how people make choices because resources are limited and wants are unlimited.

• The study of weather patterns and climate change.

• The study of ancient civilizations and their cultures.

• The study of physical fitness and exercise routines.

What is scarcity?

• The situation where people have unlimited wants but limited resources.

• The situation where resources are unlimited and wants are limited.

• The situation where everyone gets what they want.

• The situation where resources are always increasing.

Why does scarcity force people to make choices?

• Because there are not enough resources to satisfy all wants, so decisions must be made about how to use them.

• Because people always want more than they need, so they must choose what to ignore.

• Because resources are unlimited, so people must decide how to use their time.

• Because everyone has the same needs, so choices are unnecessary.

What is opportunity cost?

• The value of the next best alternative you give up when making a choice.

• The total amount of money spent on a project.

• The profit earned from an investment.

• The resources used to produce goods.

Give an example of opportunity cost.

• Choosing to buy lunch instead of saving the money for a concert ticket.

• Eating lunch at noon instead of at 1 PM.

• Walking to school instead of taking the bus for fun.

• Wearing a red shirt instead of a blue one because you like red.

What are the three basic economic questions?

• What should we produce? How should we produce it? For whom should we produce?

• What is the price of goods? How much profit can be made? Who will sell the products?

• How many resources are available? What is the government policy? Who are the competitors?

• What is the demand? What is the supply? Who are the consumers?

What does rational decision-making compare?

• Marginal benefits versus marginal costs.

• Total revenue versus total cost.

• Fixed costs versus variable costs.

• Supply versus demand.

What are sunk costs?

• Past costs that cannot be recovered and should not influence new decisions.

• Future costs that can be avoided by making different choices.

• Costs that are always included in profit calculations.

• Expenses that are reimbursed by the company.

What is personal economics also known as?

• Financial literacy.

• Macroeconomics.

• Industrial economics.

• Behavioral economics.

Name two skills included in personal economics.

• Budgeting and saving.

• Painting and sculpting.

• Dancing and singing.

• Cooking and baking.