CH-1 The Economic Problem.pptx - The Economic Problem An introduction to economics(summary of the main points Summary of the main points We have a range

CH-1 The Economic Problem.pptx - The Economic Problem An...

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The Economic Problem An introduction to economics (summary of the main points)
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Summary of the main points We have a range of needs and wants Somehow the economy seems to provide us with the goods and services that we want If we could reorganise this system to meet needs and wants more effectively or efficiently we would increase overall economic welfare Economics looks at how the system works best to do this The economic system tries to solve three questions
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Summary of the main points Economic activity are not just those that involve exchange of money. It can include Trade between nations Charity work DIY Bartering Subsistence farming And illegal trade These are all goods and services that satisfy needs and wants It includes legal, illegal, formal (measured) and informal (not measured e.g. DIY) The problem is that there are not enough resources to meet every need – there is what? scarcity – resources are finite or limited. We need to therefore find the best way to allocate resources to maximise benefits for the whole of society
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Summary of the main points So…choices need to be made – what is the economic term for this? opportunity cost Opportunity cost – the next best alternative forgone (given up) You have an amount to spend – you make a choice as to what you will spend it on. Will you buy a magazine or a sandwich? If you chose the magazine then the opportunity cost is the sandwich. If you chose the sandwich the opportunity cost would be the magazine. Economic goods are goods that are…. scarce and involve an opportunity cost Free goods have no….. opportunity cost In reality almost every good is an economic good today.
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Summary of the main points – economic resources Economists classify resources into 4 types. What are they?
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Summary of the main points – economic resources Each of these economic resources or factors of production attracts payments for their use (you need to use the right terms) The reward/payment for land is… rent The reward/payment for labour is… wages The reward/payment for capital is… interest The reward/payment for enterprise is… profit Owners of factors of production can sell or loan them and receive their reward (this is known as factor incomes) Some resources are renewable e.g… fish and forests and some are non-renewable… e.g. oil and coal
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Summary of the main points – the objectives of individuals, firms and government There are four main players in the economy – known as economic agents What are they?
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