The economic Problem

• what is the economic problem ?

  •People have unlimited wants, all resources are limited, but demands for these are unlimited.

  •This occurs when finite sources are to supply unlimited demand=Scarcity
• What is Scarcity ?

  a situation which arises due to people having unlimited wants in the face of limited resources.
• What are economic resources ?

  basic items used in all types of production ; human and natural resources.
• What are natural resources ?

  the resources from nature than are used in production; land, raw materials and natural processes.
• What are capital resources ?

  The processed materials, equipments and buildings used in production.
• What are human resources ?

  The efforts of people involved in production; labour and entrepreneurship.
• What is competitive advantage?

  Any feature of a business that enables it to compete effectively; this could be based on price, quality or service.
• Break-even point?

  The level of output where there is neither a profit or loss is made.
• Assets?

  Something you own of value.
• Cash Flow?

  The movement of cash in and out a business.
• Cash flow forecasts?

  Predicted expected flow of cash income and expenditure in a month.
• Entrepreneurs ?

  Someone who starts a business.
• Enterprise?

  When you spot a gap in the market for a business oppurtunity.
• Scarcity ?

  A situation that arises because people have unlimited wants in the face of limited resources.
• What are renewable resources ?

  ones that can be replenished e.g. trees
• What are non-renewable resources ?

  ones that are in finite supply and will run out e.g. natural gas and oil
• opportunity cost?

  ‘Next best alternative‘
• What is the importance of opportunity costs to economic agents?

  •What to produce?

  What goods and services to produce

  •How to produce?

  Firms will combine the factors of

  production to produce a good or

  service.

  •For whom to produce ?

  In a free market economy we produce

  according to demand and supply.

  -If there is demand for a product a firm may wish to supply it for profit.
• Economic agents ??


  The consumers, producers and governments that partake in economic activity, the demand for supply of good and services.
• Free market economy??

  One where firms decide what good and services to produce with limited intervention from the government.
• Trade-off??

  More of one and less of another. Opt for a benefit at the cost of another benefit.