The economic problem Flashcards
What is the basic economic problem?
Wants are unlimited but resources are finite, so choices have to be made about how to use and distribute them optimally
What is scarcity
The shortage of goods in relation to human wants
What 4 subcomponents resources can be split into?
Land, labour, capital and enterprise
How does the economic model determine what is produced?
Consumer preferences through ‘spending votes’
How does the economic model determine how things are produced?
Businesses seek minimised production costs in search of profits
How does the economic model determine who goods are produced for?
Goods are produced for whoever has the biggest purchasing power. The government can also impact who receives certain goods and services
What is a positive statement?
A fact backed up by evidence
What is a normative statement?
A personal view
