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Economics Notes ­ Chapter 2 18th September 2011

The Economic Problem

Economics and the Economic problem

The economic problem (EP) is that there are only limited amount of resources to produce
an unlimited quantity of goods and services people desire.

The Economic problem, scarcity and choice

The EP exists because…

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The ultimate purpose of economic activity is to improve people's economic welfare and
standard of living. However, almost all goods we consume must first be produced; finite
resources are used and, once used, cannot be used again ­ renewable resources can be
used again and again. The basic nature of…

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The UK as a mixed economy

The development of mixed economies

A mixed economy developed quickly when industries (i.e. coal, rail and steel) were taken
into public ownership. This worked well and most agreed that consumer goods and
services were best kept private but natural monopolies should be nationalised. A…


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