The basic economic problem

• Wants - desires for goods and services
• Resources - factors used to produce goods and services
• The economic problem - unlimited wants exceeding finite resources
• Scarcity - a situation where there is not enough to satisfy everyone's wants
• Economic good - a product which requires resources to produce it and therefore has an opportunity cost
• Free good - a product which does not require any resources to make it and so does not have an opportunity cost
• Capital/Capital goods - human-made goods used in production
• Consumer goods - goods and services purchased by households for their own satisfaction
• Entrepreneur - a person who bears the risks and makes the key decisions in a business
• Occupationally mobile - capable of changing use
• Geographically mobile - capable of moving from one location to another location
• Mobility of labour - the ability of labour to change where it works or in which occupation
• Mobility of capital - the ability to change where capital is used or in which occupation
• Mobility of enterprise - the ability to change where enterprise is used or in which occupation
• Labour force - people in work and those actively seeking work
• Productivity - the output per factor of production in an hour
• Output - goods and services produced by the factors of production
• Investment - spending on capital goods
• Gross investment - total spending on capital goods
• Depreciation (capital consumption) - the value of capital goods that have worn out or become obsolete
• Net investment - gross investment minus depreciation
• Negative net investment - a reduction in the number of capital goods caused by some obsolete and worn- out capital goods not being replaced
• Opportunity cost - the next best alternative forgone while making an economic decision
• Production possibility curve - a curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology