Choice | Consumer | Economic Goods | Free Goods | Goods | Limited Means | Opportunity Cost | Scarcity | Service | The basic economic problem | The real cost of a decision | Wants | Why can individuals not have everything they want
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, and (iii) explain how values held by consumers will influence the decisions they make.
A consumer is a person (individual) who buys/uses goods and/or services. Values are core beliefs of 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 values keeping fit and healthy is likely to be influenced in their decision making by this and may therefore purchase a gym membership and clothing items to be used while exercising as a consequence of holding this value. If a person values education they will spend time studying, completing homework or assignments or pay a tutor to improve their understanding so that they can get better results or pass the course they are doing.
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.
Mariah could buy a pie, a bag of chips or a roll. She considers the roll the most desirable and the pie the least. What is the opportunity cost of her decision? Justify your answer.
The opportunity cost is the next best alternative foregone when a decision is made, for Mariah it is a bag of chips.
List examples of values that people may hold.
The importance of getting an education, the importance of keeping fit and healthy, the importance of looking after the environment and the importance of financial security. Integrity, honesty, consideration of others, fair trading.
What is the term given for core beliefs or key principles or those things we consider most important?
What is the economic term that describes goods that are plentiful and have no cost, e.g., sunshine, clouds.
What is the difference between free goods and economic goods?
Free goods are plentiful and have no cost. Economic goods are scarce and have a cost.