the economic problem

• The world’s resources are finite - economists therefore say that resources are scarce
• People have a limited number of needs which must be satisfied if they are to survive as human beings - people's needs are finite
• Human wants are unlimited
• Basic economic problem: resources are scarce but wants are infinite
• • Free goods have no opportunity cost 
• • 3 parts of the economic problem: what is to be produced?, how is production to be organised?, for whom is production to take place? 
• Factors of production - land, labour, capital and enterprise
• • Capital - the stock of manufactured resources used in the production of goods and services
• Economic goods - goods that are scarce because their use has an opportunity cost
• Entrepreneurs - individuals who seek out profitable opportunities for production and take risks in attempting to exploit these
• Factors of production - the inputs to the production process
• Fixed capital - economic resources such as factories and hospitals which are used to transform working capital into goods and services
• Free goods - goods that are unlimited in supply and which therefore have no opportunity cost
• Human capital - the value of the productive potential of an individual or group of workers
• • Labour - the workforce
• Land - all natural resources
• • Needs - the minimum that is necessary for a person to survive as a human being 
• Opportunity cost - the benefits forgone of the next best alternative
• Scarce resources - resources that are limited in supply so that choices have to be made about their use
• • Sustainable resource - renewable resources that is being economically exploited in such a way that it will not diminish or run out
• Wants - desires for the consumption of goods and services
• • Working capital - resources that are in the production system waiting to be transformed into goods or other materials before being finally sold to the consumer