1.1.1 - The Economic Problem

Finite resources

Resources with an end or limit

Infinite wants

Without limits

Needs

Basic requirements for human survival

Wants

Peoples desires for goods and services

Basic economic problem

Allocation of a nations resources between competing uses that represent infinite wants

Scarce resources

Amount of resources available when supply is limited

Opportunity cost

The cost of the next best alternative when making a choice

Capital goods

Goods purchased by firms and used to produce other goods

Consumer goods

Goods purchased by households

PPC

Line that shows all the different combinations of two goods an economy can produce if all resources are fully and efficiently employed

Economic growth

Increase in the level of output by a nation