Basic economic problem Flashcards
1
Q
The basic economic
problem
A
The basic economic problem is concerned with how best to allocate scarce resources in order to satisfy people’s unlimited needs and wants.
2
Q
Economic agents
A
Economic agents are households (private individuals in society), firms that operate in the private sector of an economy and the government (the public sector of an economy).
3
Q
Private sector
A
Private sector refers to economic activity of private individuals and firms. The private sector’s main aim is to earn profit for its owners.
4
Q
Public sector
A
Public sector refers to economic activity directly involving the government, such as the provision of state education and healthcare services. The public sector’s main aim is to provide a service.
5
Q
Goods
A
Goods are physical items
such as tables, cars,
toothpaste and pencils.
6
Q
Services
A
Services are non-physical
items such as haircuts, bus
journeys, telephone calls
and internet access.
7
Q
Needs
A
Needs are goods and
services that are essential
for survival.
8
Q
Wants
A
Wants are goods and services that are not necessary for survival but are demanded by economic agents to fulfill their desires.
9
Q
economic good
A
An economic good is one which is limited in supply, such as oil, wheat, cotton,
housing and cars.
10
Q
Free goods
A
Free goods are unlimited in supply, such as the air, sea, rain water, sunlight
and (to some extent) public domain webpages. There is no opportunity cost in
the production or consumption of free goods.
