The economic problem

• Barter is the practice of exchanging goods and services without the use of money.
• Basic economic problem is that there are infinite wants but finite resources.
• capital goods are Producer or capital goods such as plant (factories) and machinery and equipment

  are useful not in themselves but for the goods and services they can help produce in the future
• Constraints limits to what we can afford to consume so we have to operate within a budget and therefore make choices from those sets that are feasible
• Economic agents are a participant in an economic system
• Entrepreneur is an individual who seeks to supply products to a market for a rate of return
• Factor incomes are the rewards to factors of production, such as labour and capital.
• Labour receives wages and salaries. Land earns rent. Capital earns interest and enterprise earns profit
• finite resources are resources that are limited in supply and cannot be replaced quickly like workers, reserves of oil
• Free Goods do not use any factor input when supplied. They have a zero-opportunity cost
• interest is the reward to the ownership of capital
• Non-renewable resources are resources which are finite and cannot be replaced like fossil fuels
• Rationing is a way of allocating scare goods and services when market demand exceeds available supply
• renewable resources are replaceable if the rate of extraction of the resource is less than the natural rate at which the resource renews
• scarcity is only a limited amount of resources available to produce the unlimited amount of goods and services we desire