The Nature and Purpose of Economic Activity
- An economy and the central purpose of economic activity is to produce good and services to provide what we need and want.
- If we could organise a system that would meet wants and needs more efficiently and effectively then we would see overall evonomic welfare for the citizens increase.
The 3 Key Questions
- What should we produce?
- How should we produce it?
- For whom should it be produced?
The fundamental Economic Problem
- Wants are infinite whereas resources to provide the wants are finite.
- This means that resources are scarce.
- Therefore choices must be made in order to benefit the economy the most with the limited resources.
- Each choice has a cost: the next best alternative forgone; the opportunity cost.
- Economic goods are goods that are scarce and therefore have an opportunity cost.
- Free goods have no opportunity cost; eg. air.
The Economic Resources/Factors Of Production
- Land - Goods such as minerals, land itself and all the resources we take from the world like fish, forestry & air.
- Labour - The potential workforce; the people, their skillset/abilities and intelligence.
- Capital - The stock of goods used to make other goods and services. For example; machines, tools, computers etc.
- Enterprise - The risk takes who are prepared to work to bring…