The Economic Problem 1.1.3

• What is the basic economic problem?

  The basic economic problem is about scarcity and choice.
• What is the main purpose of economic activity?

  The main purpose is to produce goods and services to satisfy consumer needs and wants.
• What are the three main questions societies must decide regarding economic activity?

  1. What goods and services to produce?
  2. How best to produce goods and services?
  3. Who is to receive goods and services?
• What does scarcity refer to in economics?

  Scarcity refers to the limited nature of resources in contrast to infinite wants.
• How do consumers make choices due to scarcity?

  Consumers make decisions about when to travel and which mode of transport to use.
• What are the four main categories of factors of production?

  • Land
  • Labour
  • Capital
  • Enterprise
• What does the acronym CELL stand for in economics?

  Capital, Enterprise, Land, Labour.
• What are capital goods?

  Capital goods are used to make consumer goods and services.
• What are examples of capital inputs?

  Examples include plant and machinery, hardware, and software.
• What is capital-labour substitution?

  It is when capital is used to replace labor in production processes.
• What are some recent examples of capital-labour substitution?

  • Robots in Amazon warehouses
  • Grocery suppliers like Ocado for picking and packing
• What is working capital?

  Working capital includes stocks of finished products and component parts.
• What role do digital platforms play in capital goods?

  Digital platforms enable services like cloud computing and mass production.
• What is an example of infrastructure in capital goods?

  Air traffic control systems.