Choice | Consumer | Economic Goods | Free Goods | Goods | Limited Means | Opportunity Cost | Scarcity | Service | The basic economic problem | The real cost of a decision | Values conflict and compromises | Values influence decisions made | Values people hold | Wants | Why can individuals not have everything they want
Describe what is meant by the term 'consumer'.
A consumer is a person/individual who buys/uses goods and/or services.
Jamie has worked a part-time job after school and earnt $2 000 which she will use to either put into a savings account, or spend it on a month long trip to Australia. Jamie decides to put the $2 000 into a savings account. Explain the economic problem faced by Jamie and the opportunity cost of her decision.
The economic problem faced by Jamie is scarcity.Individuals have limited means (income, skill, time) relative to their unlimited wants, so can not afford to buy everything they desire or have sufficient time to do everything, so they must make choices. Jamie has only $2 000 to decide between the two options, either save or a trip to Australia. She cannot afford to do both options, so therefore must make a choice. Choosing the savings option means foregoing the next best alternative, which is the opportunity cost of her decision. In Jamies' case the opportunity cost is the month long trip to Australia foregone.
Emma works part-time at the local pizza place during the week. She divides the rest of her time between studying, going to the gym and visiting her family and friends. What activity will Emma most likely do if she values (i) financial security, (ii) education, (iii) her health.
If Emma values financial security, she is most likely to do is work at the pizza place to earn an income. If Emma believes it is important to get an education she will spend her time studying, whereas if Emma believes it is important to keep healthy she will attend the gym on a regular basis to improve her fitness.
Whanau (family) is one of the limited means used by an individual to satisfy their unlimited wants. List three other limited means an individual has.
Income/money/wealth. Time. Skill or knowledge.
In making a decision, a consumer must consider their values (which could include consideration of others and the importance of keeping fit and healthy). Fully explain how values influence the economic decision a consumer may make. In your answer: (i) define what is meant by a consumer and values (ii) describe why consumers may hold different values (iii) explain how values held by consumers will influence decisions they make.
A consumer is a person (individual) who buys / uses goods and/or services. Values are core beliefs or key principles that individuals consider most important, e.g., consideration of others, the importance of keeping fit and healthy. The values that an individual holds are determined by their age, peer pressure, media, upbringing, personal experiences, religion and culture. An individual that holds the value of keeping fit and healthy is likely to be influenced in their decision making by this and therefore could purchase a gym membership and clothing items to be used exercising as a consequence of holding this value.
Jason always has something to do, week nights are taken up doing homework, training for surf lifesaving and doing chores around home. Despite his best efforts, he never manages to do all tasks in a single day. With specific reference to Jason, explain how limited means, choice and opportunity costs are linked.
Jason only has 24 hours in a day and time spent on one option (homework) cannot be used for the other options (either training for surf lifesaving or doing his chores) tasks that need doing. While Jason's time is limited, his wants on the other hand are unlimited. Jason does not have sufficient time to do everything he wants (or desires) to do in a single day. Jason has to make a decision between alternatives (i.e., a choice) about what to do. He will choose the option he desires the most. For example, time spent doing his homework cannot be used to do his surf training or his chores (which is the least preferred option). Every choice Jason makes results in an opportunity cost, which is the next best alternative foregone. The opportunity cost is the second ranked alternative missed out on when a choice or decision is made, in this instance it will be surf training.
What is the economic term that describes goods that are plentiful and have no cost, e.g., sunshine, clouds.