chapter 1.1: The basic economic problem key words Flashcards
Resources
Factors used to produce goods and services e.g natural resources, labour, innovation etc.
Basic economic problem
The question of how best to allocate scarce resources in order to satisfy people’s unlimited wants and needs
scarcity
a situation where there is not enough to satisfy everyone’s wants
economic agents
households, firms that operate in the private sector of the economy and the government which work in the public sector.
Public sector
Economic activity directly involving the government, such as the provision of state education and healthcare services.
Private sector
refers to the part of the economy that is owned and operated by individuals or private companies, rather than the government.
e.g shops, factories, and services.
Goods
Physical items such as tables, cars, shoes and pencils
Services
Non-physical activities or tasks provided to meet the needs of consumers
e.g banking, haircuts and internet access
Needs
Goods and services essential for survival
Wants
Goods and services not essential for survival but desires
Free goods
Goods which are unlimited by supply, such as air and seawater.
No opportunity cost in terms of output as no resources are used to produce.
Economic goods
Goods which are limited in supply.
Three main economic agents or decision makers
-Households/firms
-Firms and businesses which operate in the private sector
-Government
Three main economic questions addressed by economic agents
-What to produce
-How to produce it
-For whom to produce it
What do all economic agents do
produce and consume goods and services
