The Basic Economic Problem and Decision-Making Flashcards
What is the basic economic problem that forces choices to be made?
Relative scarcity
Who must make choices regarding the basic economic problem?
Individuals, businesses, and governments at all levels (local, state, national, international)
What is the first question societies must answer regarding production?
What and how much to produce?
What does the question ‘What and how much to produce?’ imply?
Societies must decide which goods and services to produce and in what quantities.
What is the second question societies must answer regarding production?
How to produce?
What must decisions about ‘how to produce’ involve?
Methods of production and the combination of factors of production to be used.
What is the third question societies must answer regarding production?
For whom to produce?
What does the question ‘For whom to produce?’ address?
How the goods and services produced will be distributed among members of society.
