Economic problem

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  • Economic problem - scarcity and choice
    • Economic and free goods
      • Free good, such as air are naturally abundant in supply
      • Economic goods, are consumable items which are scare in relation to demand. Human effort is needed to obtain it.
    • Implications of the basic 'economic problem'
      • The basic economic problem is an unlimited amount of wants but a limited amount of resources causing scarcity.
    • Normative and positive statements
      • Normative, based on opinion 'the government should provide basic health care'
      • Positive, true and based on fact 'smoking can shorten life expectancy'
    • Scarcity,the state of being scarce or in short supply; shortage.
      • Evaluate with an example the problem of scarcity: oil is scarce and yet has a huge demand.
    • Economic agents
      • Households, make choices about expenditure
      • Firms, produce goods or services
      • Government, make decisions for the whole of society
    • Factors of production
      • Land, Labour, Capital and Enterprise
        • Land, Resources
          • Labour, Human input
            • Capital, Fixed capital = machinery. Working capital = stocks (half finished goods)
            • Enterprise, entrepreneurs organise factors of production
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