1.1.3 The Economic Problem

• The basic economic problem is scarcity.

  Unlimited wants and finite resources, subsequently decisions must be made on how to allocate resources efficiently.
• Opportunity cost is the value of the next best alternative.
• Four Factors of Production

  1. Land
  2. Labour
  3. Capital
  4. Enterprise
• Land refers to natural resources, or physical space.
• Labour refers to the workforce of the economy.
• Capital is the equipment used to produce the good or service.
• Enterprise is the willingness to take risks.
• Renewable resources can be replenished, so the stock level can be maintained over a period of time.
• Renewable resources are sustainable.
• Non renewable resources cannot be replenished, so the stock level decreases over time as it is consumed.