Need: Something essential that you need to survive
Want: Something you desire but is not essential
The basic economic problem is that there are infinitewants and finite resources in an economy. Therefore choices must be made about how to allocate resources
Land: Natural resources
Labour: Work done by humans
Capital: Man-made resources and machinery
Enterprise: The combination of the other 4 factors or production with risk and the ability to organise
The reward for land is rent
The reward for labour is wages
The reward for capital is interest
The reward for enterprise is profit
Microeconomics studies the behaviour of individuals and firms, while Macroeconomics considers the whole economy
Consumers aim to maximise total utility
Workers aim to maximise wages and benefit from work
Producers aim to maximise profit
Governments aim to maximise social welfare
Opportunity cost is the value of the next best alternative forgone when making a choice