Unit 1 - The basic economic problem
The Nature Of The Economic Problem
Finite Resources And Unlimited Wants
The economic problem: people have infinity wants, but there are finite resources to satisfy those wants,
choices have to be made
Economic problems in the context of
● Consumers: unable to buy al the wants at a time, have to make choices
● Workers: able to work longer hours to earn more money o have downtime, involves choice and
the sacrifice
● Producers: only has so many resources at their disposal, therefore if they produce more of one
good, they will have less of another
● Governments: a limited amount of money for essential services, therefore if they spend more
on one service, they will have to spend less on another
Economic And Free Goods
Economic good: a good that is scarce in relation to its demand so a price is charged
Free good: not scarce relative to the demand (no price charged)
The Factors Of Production
Definitions Of The Factors Of Production And Their Rewards
● Land: gifts of nature used in production (rent)
● Labour: human resource enabling physical and intellectual work (wages and salaries)
● Capital: human-made aids of production (interests)
● Enterprise: coordination of the other factors of production involving risk (profit)
Mobility Of The Factors Of Production
Geographical mobility: the ability of factors of production to move from an area to another
Occupational mobility: the ability of factors of production to move from one use to another
Factors Geographical mobility Occupational mobility influences
Land Relatively, impossible to You can change the use of a Reclaiming land it very
move from one area to given piece of land expensive
another, but you can
reclaim land
The Nature Of The Economic Problem
Finite Resources And Unlimited Wants
The economic problem: people have infinity wants, but there are finite resources to satisfy those wants,
choices have to be made
Economic problems in the context of
● Consumers: unable to buy al the wants at a time, have to make choices
● Workers: able to work longer hours to earn more money o have downtime, involves choice and
the sacrifice
● Producers: only has so many resources at their disposal, therefore if they produce more of one
good, they will have less of another
● Governments: a limited amount of money for essential services, therefore if they spend more
on one service, they will have to spend less on another
Economic And Free Goods
Economic good: a good that is scarce in relation to its demand so a price is charged
Free good: not scarce relative to the demand (no price charged)
The Factors Of Production
Definitions Of The Factors Of Production And Their Rewards
● Land: gifts of nature used in production (rent)
● Labour: human resource enabling physical and intellectual work (wages and salaries)
● Capital: human-made aids of production (interests)
● Enterprise: coordination of the other factors of production involving risk (profit)
Mobility Of The Factors Of Production
Geographical mobility: the ability of factors of production to move from an area to another
Occupational mobility: the ability of factors of production to move from one use to another
Factors Geographical mobility Occupational mobility influences
Land Relatively, impossible to You can change the use of a Reclaiming land it very
move from one area to given piece of land expensive
another, but you can
reclaim land
