Chapter  
                                                                         2 
            The Economic Problem: 
            Scarcity and Choice 
                                                      Prepared by: 
                                                           Fernando & Yvonn Quijano 
                © 2007 Prentice Hall Business Publishing   Principles of Economics 8e by Case and Fair 
                         The Economic Problem: 
     m:le                           Scarcity and Choice                                                  2 
     ob  oice
     Pr  d Ch                                                                                     Chapter Outline 
         an                                                                                  Scarcity, Choice, and 
     omic                                                                                      Opportunity Cost 
     on  ty                                                                                  Scarcity and Choice in a  
         ci                                                                                    One-Person Economy 
     Ec                                                                                      Scarcity and Choice in an 
                                                                                               Economy of Two or More 
         Scar                                                                                The Production Possibility Frontier 
     The                                                                                     Comparative Advantage 
     2:                                                                                        and the Gains from Trade 
                                                                                             The Economic Problem 
     R                                                                                        
                                                                                             Economic Systems 
                                                                                             Command Economies 
     PTE                                                                                     Laissez-Faire Economies: 
                                                                                               The Free Market 
                                                                                             Mixed Systems, Markets, 
     CHA                                                                                       and Governments 
                                                                                              
                                                                                             Looking Ahead 
                                                                                              
                        © 2007 Prentice Hall Business Publishing   Principles of Economics 8e by Case and Fair               2 of 34 
             THE ECONOMIC PROBLEM: 
             SCARCITY AND CHOICE 
      
     m:le 
     ob  oice
     Pr  d Ch
     omic an 
     on  city
     Ec                                    FIGURE 2.1  The Three Basic Questions 
     The Scar
                          Three basic questions must be answered in 
     2:
     R                    order to understand an economic system: 
     PTE                         • What gets produced? 
     CHA                         • How is it produced? 
                                 • Who gets what is produced? 
                        © 2007 Prentice Hall Business Publishing   Principles of Economics 8e by Case and Fair               3 of 34 
             THE ECONOMIC PROBLEM: 
             SCARCITY AND CHOICE 
                                 capital  Things that are themselves 
     m:le 
     ob  oice                    produced and that are then used in the 
     Pr  d Ch                    production of other goods and services. 
     omic an 
     on  city                    factors of production (or factors) The 
     Ec                          inputs into the process of production. 
     The Scar                    Another word for resources. 
       
     2:
     R    
     PTE
     CHA  
                        © 2007 Prentice Hall Business Publishing   Principles of Economics 8e by Case and Fair               4 of 34