1.2 - The Basic Economic Problem

• The basic economic problem is that resources are scarce, but human wants are unlimited.
• 3 Basic Questions in Economics:

  • What to produce?
  • How to produce?
  • For whom to produce?
• In order to allocate resources effectively, societies must prioritise resources and decide which wants and needs to satisfy first. This involves making trade-offs and accepting opportunity costs.
• Opportunity cost refers to the value of the next best alternative that is forgone when a choice is made.
• Social sustainability is the impact of development or growth that promotes an improvement in quality of life for all, now and in the future.
• Economic sustainability is the best use of resources in order to create responsible development now and in the future.
• Environmental sustainability is the impact of growth or development where the effect on the environment is small and manageable, now and in the future.
• A scarce resource refers to there being an insufficient amount of something in order to satisfy all wants