- Economics 1

8/9/25 Introduction to Economics - 9/9/25 The Basic Economic Problem

A want is…

something you’d like to have / desire that’s not essential for survival.

A need is…

something that is essential for survival.

Define a Good

A tangible product

Define a Service

An intangible product

Define economic activity

All actions of individuals, firms and governments to use resources to produce goods and services, that provide for people’s needs and wants, thereby improving economic welfare.

Define economic welfare

Overall wellbeing (living standards, comfort) of groups within an economy.

What is the main purpose of economic activity

To (establish and) improve economic welfare.

List 2 things that mainly determine economic welfare

• How people feel (mental, day to day)

• How much they have (prosperity)

Define the economic problem

Fundamental challenge that humans have unlimited needs and wants, yet the resources available to satisfy them are finite and scarce.

What is a suitable way to deal with the economic problem

Deduce what to produce, how to produce it, and for whom to produce things for; this way, systems can be established to produce a reasonable amount of different goods.

What is methodology framework

A practical guide that provides a systemic approach to tackling complex challenges, through stages like hypotheses, processes, and theories.

List the stages of methodology framework

1. Observe certain behaviour in society

2. Formulate hypothesis

3. Develop a prediction about why

4. Use evidence to test prediction

Methodology framework - signature burger

1. Customers stop buying burger after the price of it goes up.

2. The price increase caused demand for the burger to drop.

3. “If the price of the burger goes up, customers will buy other menu items, or go to other restaurants.”

4. Compare sales data before and after increase (if sales of cheaper items - or sales of other competitors - increase after burger price increases, prediction is supported).

What does a successful hypothesis become

A new economic theory

What does a failed hypothesis become

A rejected theory

Define factors of production

The 4 main classifications of resources, suggested by economists. They are the inputs into the production process of almost anything.

List the 4 FOPs

• Capital

• Enterprise

• Land

• Labour

What is the acronym for the FOPs

CELL