2). The Economic Problem

• What 3 questions does the economic problem try to answer?

  • What to produce?
  • How to produce?
  • Who to produce for?
• What are renewable resources?

  Resources that can be replenished naturally or through human intervention.
• What are non-renewable resources?

  Resources that are in finite supply and therefore, will run out.
• What are sustainable resources?

  Resources that are being used for economic activites in such a manner that they will not run out.
• What are the 4 factors of production?

  • Capital
  • Labour
  • Land
  • Enterprise
• What creates the economic problem of scarcity?

  People have unlimited wants and needs, however there aren't enough resources to supply all of these needs and wants.
• What does scarcity mean for us?

  It means we have to make choices over the use of our limited resources to provide for our infinite wants.
• What does opportunity cost mean?

  The benefit lost of the next best alternative when making a choice. There is an opportunity cost for all decisions made by economic agents.
• What are capital goods?

  Goods that are used to produce consumer goods.
• What are consumer goods?

  They are items we buy to satisfy our needs and wants.