Basic Economic Problem

• man's physical needs are essential
• man's wants are unessential
• factors of production (reward)

  1. land (rent)
  2. labour (salary / wages)
  3. capital (Rate of return)
  4. entrepreneurship (profit)

  CELL
• resources are limited and wants and needs are unlimited = scarcity
• decisions made by each society

  1. what to produce
  2. how to produce
  3. for whom to produce
• opportunity cost: the benefits of the next best or highest valued alternative forgone
• free market economies: households own resources and free markets allocate resources through the price mechanism

  
  

  mixed economies: some resources owned by private and public sector

  
  

  command economies: scarce resources are owned by the state