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Chapter 1.2 - The Basic Economic Problem (Economic Problem (What should be…
Chapter 1.2 - The Basic Economic Problem
Keywords
Unlimited Wants - The infinite desire for something
Need - Something a consumer has to have to survive
Scarce Resources - Where there is an insufficient amount of something to satisfy all wants
Want - Something a consumer would like to have but which is not essential for survival
Wants vs Needs
Needs are limited only to what is needed to survive
The worlds scarce resources could never fulfill everyone's wants, however satisfy all consumers needs
They include anything a consumer would like whether or not that consumer has the resources to buy it
Wants are unlimited
Economic Problem
What should be produced?
How should it be produced?
To try and meet consumers wants, choice and decisions have to me made regarding:
Whom should it be produced for?
The economic problem is the problem that arises because the Earth's limited resources are not sufficient to satisfy all of humans wants and needs
Opportunity Cost
When deciding how to allocate scarce resources, the decision can be made based on opportunity cost
Opportunity cost is the next best alternative given up when making a choice
Economic Choices
Economic Sustainability
May consider
Financial Costs
Government Spending
Taxes
Jobs
The best use of scarce resources in order to create development/growth over time
Social Sustainability
Considers the impact on local community's quality of life and well being
May consider
Quality of life
Local issues - crime, congestion, accessibility
Fairness to all
Who pays (tax payers) and who benefits (specific groups)
To make economic choices government and firms weigh up costs and benefits in three key areas
Environmental Sustainability
Considers the impact on the enviroment
May consider
Pollution and climate change
Renewable and non-renewable resources