Leon

• Define the term “Renewable resources”

  • Can be replaced naturally after use
  • e.g. Solar energy, wind power, wood, and fish
  • Sustainable, unless they are consumed more quickly than they are replaced
• Define the term “non-renewable resources”

  • Resources where continued consumption will eventually result in their exhaustion
• Define the term “opportunity cost”

  The next best alternative that is forgone when a choice is made
• Explain how opportunity cost is linked to scarcity

  • Scarcity implies that a choice must be made
  • Each choice involves an opportunity cost
  • If a country used its resources on one product, it must forgo an alternative product that could have been produced (the opportunity cost of what had been produced)
  • Opportunity cost is therefore a real cost measured in terms of something that is forgone
• Give an example of an opportunity cost in relation to a consumer

  A university student might have enough money to buy either a jet ski or a surfboard. If a student buys a jet ski, the opportunity cost is the surfboard
• Give an example of an opportunity cost in relation to a firm

  A firm might have to make a choice between a new IT system or building a new factory. If it chooses the IT system, the opportunity cost is the new factory
• Define the term “economic goods”

  Created from resources that are limited in supply and so are scarce. Consequently, they command a price
• Define the term “free goods”

  • Unlimited in supply
  • Consumption by one person does not limit consumption by others
  • The opportunity cost of consuming a free food is zero