the economic problem

• What is microeconomics primarily concerned with?

  How to best solve the basic economic problem of allocating scarce resources.
• Why is the term "basic economic problem" considered misleading?

  Because the problem of resource allocation is very severe.
• What does the term "scarce resources" refer to in economics?

  Resources that are limited in availability compared to unlimited wants.
• What are the four types of resources or factors of production in economics?

  Capital, enterprise, land, and labor.
• What is capital in the context of economics?

  • Man-made aids to production
  • Examples include machinery, tractors, vehicles, factories, and computers
• What role does enterprise play in economics?

  • Refers to risk-takers who innovate
  • Entrepreneurs produce goods and services to make profits
• What is meant by land in economic terms?

  • Natural resources used for production
  • Examples include farmland and rainforests
• How is labor defined in economics?

  • Human resources that produce goods and services
  • Workers are considered labor in this context
• Why do we need to make choices in economics?

  Because resources are scarce and cannot satisfy unlimited wants.
• What are the three fundamental choices in a market economy?

  1. What to produce
  2. How to produce it
  3. For whom to produce
• How do businesses decide what to produce in a market economy?

  Based on consumer demand.
• What influences how businesses decide to produce goods and services?

  Cost-effectiveness and productivity.
• Who determines for whom goods and services are produced in a market economy?

  Those who have enough income to afford them.
• What is opportunity cost in economics?

  The cost of the next best alternative foregone when a choice is made.