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The basic ecnomic problem: economic goods, choice and the allocation of…

- - - - As a result, we cannot have everything we want, and so we have to make choices. This is called the opportunity cost.
      - Wants are infinite because:
        
        Many resources are limited in quantity, such as land
        
        When resoures are in use, they cannot be used for anything else at the same time such as labour
  - - - There are 3 types of resources:
        
        Natural resources - Soil, climate, water, minerals, forests and fisheries
        
        Man-made resources - Machinery, buildings, roads, etc
        
        Human resources - People and their skills
  - - - The needs - Things we need for survival such as basic food and shelter
      - The wants - things we desire which may include neesd but also luxury items
  - - - Making a choice
      - Making a sacrifice
      - You need fully understand the implications of making a choice in terms of what has to be given up.
  - - - If you have the choice to either buy or borrow the book, you can buy the book but you sacrifice the opportunity to buy something else.
  - - - Scarce good relative to the demand for it, hence a price is charged for this good
    - - A good that is not scarce relative to the demand, hence there is no price charged for this good.
- - - - Consumers - The people who buy the goods and services
      - Workers - The people who supply their labour in return for a wage or salary
      - Producers - The people who make and sell the goods and services
      - The government - Can be a producer, a consumer and a lawmaker
      - Decisions made by these groups invilve an opportunity cost.
- - - - Human-made ades to production (e.g. Machines, tools, buildings, equipments, etc)
        
        Reward: Interest - Payment made on any money borrowed to buy capital equipment, such as machinery or equipment
    - - Coordination of other factors of production involving the taking of a risk
        
        Reward: Profit - Reward for taking a risk is known as profit
    - - The human resource enabling both physical and intellectual work. (e.g. physical effort of a coal miner & mental effort of an accountant) Labour is sometimes referred to as human capital.
        
        Reward: Wages and salaries - Wages paid to workers when paid on an hourly, daily or weekly basis. Salary refers to an annual amount of payment, a proportion of which is usually paid to a worker each month.
    - - A general term used to describe the gifts of nature used in production.
        
        Reward: Rent - E.g. payment may need to be made for the site on which a factory will be built, this payment is called rent.
  - - - The ability of factors of production to move fromm one area to another
    - - The ability of factors of production to move from one use to another
  - - - Quantity: Influenced by the reclamation of land from sea, and discovery and exploration of resources.
      - Quality: Influenced by the use of fertilisers and improved irrigation
    - - Quantity: Influenced by changes in a country's birth rate, death rate, net migration, school leaving age & retirement age for example.
      - Quality: Influenced by availability of appropriate education and trainign courses.
    - - Quantity: Availability of funds
      - Quality: The extent of the application of new technologies
    - - Quantity: Development of an enterprise culture
      - Quality: Availability of appropriate courses and networking opportunities