The Basic Economic Problem

These flashcards cover key concepts from the lecture on economic principles, particularly focused on scarcity, choices, and resource allocation.

What is the basic economic problem?

The basic economic problem arises because resources are limited but human wants are unlimited.

What does scarcity mean in economics?

Scarcity is the situation where limited (finite) resources are unable to satisfy unlimited (infinite) wants and needs.

What are the four factors of production?

Land, Labour, Capital, and Enterprise.

What is opportunity cost?

Opportunity cost is the next best alternative forgone when a choice is made.

What are needs and wants?

Needs are essential for survival while wants are additional desires that improve quality of life.

What is a trade-off in economics?

A trade-off is gaining more of one thing by giving up some of another.

Who are the economic agents?

The three main decision-makers in an economy: consumers, producers (firms), and governments.

What does the term 'utility' refer to?

Utility refers to the satisfaction or benefit a consumer gains from consuming a good or service.

How does scarcity affect consumers?

Consumers must decide what to buy with their limited income.

What is the significance of the economic system in resource allocation?

The process of deciding what to produce, how to produce, and for whom to produce defines a society's economic system.