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The Economic Problem

 

  • What goods and services should an economy produce? – Should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing?
  • How should goods and services be produced? – Labour intensive, land intensive, capital intensive? Efficiency?
  • Who should get the goods and services produced? – Even distribution? More for the rich? For those who work hard?

 Economic problem reveals that: 

  • People have unlimited Wants.  You want a TV set today, tomorrow a car.
  • Scarce Resources – Land, Labour, Capital.  The means or recourses to produce your needs and wants are scares.
  • Resource Use – scarce resources have alternative use.  With your pocket money (scarce resource) you can choose to save it or spent it on sweets.
  • Choices – the process of choosing between two alternatives.  Choosing between saving and spending involves a very special cost, i.e. opportunity cost.

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