AS Economics Notes

People have unlimited needs and wants, fulfilled by goods and services, however, there aren't enough resources to fulfill all desires 

Scarcity is when resources are limited compared to unlimited wants.

This scarcity leads to an insufficient supply of goods and services.

The conflict between unlimited wants and scarce resources leads to the need for choices, 

Choices arise due to resource scarcity, such as the trade-off between producing defense goods or food.

Economics is the study of these choices forced by resource scarcity.

Scarce resources must be used efficiently to avoid waste.

Inefficient use of resources results in lower production or the creation of unwanted goods and services.

Economics aims to find the best use of scarce resources to satisfy unlimited human needs and wants.

Opportunity cost is the value of the next best alternative you give up when making choices.

Consumers and businesses face opportunity costs when making decisions about how to use their resources.

Consumers give up the value of alternative purchases when they choose to buy one item over another.

Businesses give up the production of alternative goods or services when they focus on a specific product.

Opportunity cost matters when resources or budgets are limited.

If resources were unlimited, there would be no need to make sacrifices, and opportunity cost would be irrelevant.

Scarcity leads all economies to address three fundamental questions.

1. What to produce: Deciding on specific goods and services and their quantities.

2. How to produce: Choosing resource allocation methods, such as labor and technology.

3. For whom to produce: Determining the distribution of goods, services, and income among the population.

Resource allocation involves assigning limited resources to chosen alternatives.

Reallocation of resources occurs when changing production quantities.

Overallocation refers to producing too much of certain goods, while under-allocation refers to producing too little of socially desirable goods or services.

Economics studies how to allocate scarce resources efficiently to meet human needs and wants.

The distribution of output and income among individuals and groups is the focus of the "for whom to produce" question.

Changes in income and output distribution are referred to as income redistribution.