In economic theory, resources are classified based on their scarcity and the trade-offs involved in their allocation. Which of the following statements best explains why fresh coastal air is classified as a free good, whereas desalinated drinking water is classified as an economic good?
Fresh coastal air is a non-excludable public good provided free of charge by the state, whereas desalinated water is a merit good whose consumption must be subsidised.
The marginal utility of consuming fresh coastal air is always infinite due to its abundance, whereas the marginal utility of desalinated water is subject to the law of diminishing returns.
The consumption of fresh coastal air involves zero opportunity cost because resources do not need to be reallocated to obtain it, whereas desalinated water requires scarce resources that have alternative uses.
The price elasticity of supply for fresh coastal air is perfectly inelastic because its total physical quantity is fixed, whereas the supply of desalinated water is perfectly elastic.
123 exam-style questions on AQA A Level Economics 1.1 Economic methodology and the economic problem, covering 1.1.1 Economic methodology, 1.1.2 The nature and purpose of economic activity, 1.1.3 Economic resources, 1.1.4 Scarcity, choice and the allocation of resources, and 1.1.5 Production possibility diagrams. Each one has a worked solution and a mark scheme showing where the marks go.