3.1.1.4 Scarcity, choice and the allocation of resources

What is the basic economic problem?

how can scarce resources be used to satisfy infinite wants and needs effectively

What does scarcity require?

Choices on the careful allocation of scarce resources

What are different forms of economic activity?

making of goods (physical products) and provision of services (intangible)

Consumption

What are producers and what do they decide?

firms/people that make goods+services

decide what to make + how much to sell it for

What are consumers and what do they decide?

people/firms that buy goods/services

Decide what to buy and how much they are willing to buy it for

What is the government and what do they decide?

organisation that sets the rules that participants in the economy have to follow

decide how much to intervene in the way consumer + producer act

What is opportunity cost?

The next best alternative you are giving up when making a decision