Basic economic problem:choice and allocation of resources

Limited wants cannot supply unlimited human wants

Factors of production

Land

Capital

Labour

Enterprise

Natural Resources

Man made resources used to produce more goods and services

Human resources

Entrepreneurs

Individual as a producer, consumer and borrower

Problems with barter

Fixing a rate of exchange
Value of each and every good must be expressed in terms of every other good

Finding someone to swap with
There must be a double coincidence of wants

Trying to save

Functions of money

Money is a medium of exchange

Acceptable in exchange for all other goods

Eliminates problem of double coincidence

Money is a measure of value

Money is used to measure value of goods and services and in relative to each other

Money is a store of value

Will not lose value over time

Money is a means of deferred payment

Characteristics of money

Acceptability

Durability

Portability

Divisibility

Scarcity

Banks

Earning revenue

Charging interest on loans

Charging fees for the provision of other financial services

Withdrawals from atms

Exchanging and transferring foreign currencies

Buying and selling shares in public limited companies

Providing life, property and travel insurance

Issuing debit and credit cards

Storing valuables

Telephone and internet services