Define opportunity cost and give an example.
The next best alternative forgone when a choice is made.
✅ Example: If the government spends on defence, the opportunity cost may be reduced spending on healthcare.
What are the four factors of production?
1.)Land → natural resources
2.)Labour → human effort
3.)Capital → man-made resources (tools, machinery)
4.)Enterprise → risk-taking and organising the other factors
What do economists mean by scarcity?
Resources are limited but human wants are unlimited.
👉 This creates the need for choice and leads to opportunity cost.
What economic problem is illustrated by the government spending on renewable energy?
The problem of scarcity: resources are limited, so allocating more to one area means less for others.
To what extent can economics be considered a science?
Yes: Uses models, data, hypotheses, systematic testing.
No: Human behaviour is unpredictable, relies on assumptions (ceteris paribus), normative value judgments.
Conclusion: Economics has scientific methods but is not as precise as natural sciences.
Why are scarcity and choices central to the study of economics?
Scarcity = limited resources, unlimited wants.
Forces choices → leads to opportunity cost.
Examples:
Consumers choosing between products.
Governments choosing between welfare and defence.
Firms choosing between investment projects.
What were the three variations tested by Asch?
Group size, unanimity, and task difficulty.
