Because of scarcity every society or economic system must answer these three (3) basic questions:
- What to produce? ➢ What should be produced in a world with limited resources?
- How to produce? ➢ What resources should be used?
- Who consumes what is produced? ➢ Who acquires the product?
What forces individuals to make choices?
When scarce resources are used (and just about everything is a scarce resource), people and firms are forced to make choices that have an opportunity cost.
Why do we have to make choices because of scarcity?
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Scarcity means we all have to make choices. Because of scarcity, choices have to be made by consumers, businesses and governments. For example, over six million people travel into London each day and they make choices about when to travel, whether to use the bus, the tube, to walk or cycle – or whether to work from home.
What is the basic problem of economic activity?
It is often said that the central purpose of economic activity is the production of goods and services to satisfy our changing needs and wants. The basic economic problem is about scarcity and choice. Every society has to decide:
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What makes people happy in the economic theory?
a little extra of a product and what are the costs. Economic theory states that rational decision-makers weigh the marginal benefit one receives from an option with its marginal cost, including the opportunity cost. This cost benefit principle well applied will get you a long way in economics! What makes people happy?
Who are the best people to read on behavioural economics?
As consumers we have all made poor choices about which products to buy. Behavioural economics is an exciting strand of the subject that looks at whether we are rational in our everyday decisions. One of the best people to read on behavioural economics is Dan Ariely (pictured).
