Scarcity and allocation of resoucres

• What does natural resource economics study?


  It studies the demand, supply, and allocation of the world's natural resources.
• Why is the environment considered a scarce resource?


  Because much of what we use in economic activity is non-renewable.
• How should we use natural resources according to the study material?


  We need to use these resources in a sustainable manner.
• What mechanism is used to price resources obtained from the environment?


  The market mechanism is used to price resources.
• What political issue can arise from the allocation of resources?


  Political disruption can occur if countries have poor relationships affecting resource allocation.
• How can price signal the scarcity of a resource?


  Price can indicate scarcity; for example, 24 karat gold is more expensive than 9 karat gold due to its rarity.
• What is the fundamental economic problem mentioned in the study material?


  The fundamental economic problem is scarcity.
• What does scarcity result from?

  Scarcity results from limited resources and unlimited wants.
• What must be done due to scarcity?

  Choices must be made about how scarce resources are allocated, which involves opportunity costs.
• What is the definition of a scarce resource?


  A scarce resource is one that has less supply than its demand.
• What is a free resource?


  A free resource is one that, when taken in large amounts, does not affect others, such as water or air.
• When can things become scarce resources?


  Things can become scarce when demand increases but supply does not, or when supply decreases while demand remains constant.
• What is the opportunity cost in the context of scarce resources?

  The opportunity cost is what is given up when choosing one resource over another, such as using oil instead of solar power.
• What distinguishes renewable resources from non-renewable resources?


  • Renewable resources are reproducible and perpetually maintainable (e.g., wood).
  • Non-renewable resources are finite and cannot be replenished (e.g., oil, gas).