Basic Economic Problem and Economic Agents

A collection of vocabulary terms based on the fundamental concepts of scarcity, economic agents, and the divide between public and private sectors.

Basic economic problem

The concern of how best to allocate scarce resources in order to satisfy people's unlimited needs and wants.

Economic agents

The decision-makers in an economy, consisting of households (private individuals), firms (private sector), and the government (public sector).

Private sector

The economic activity of private individuals and firms, with the main aim to earn profit for its owners.

Public sector

Economic activity directly involving the government, such as the provision of state education and healthcare services, with the main aim to provide a service.

Economics

The study of how scarce resources are allocated to satisfy the unlimited needs and wants of individuals, governments, and firms in an economy.

Scarcity

The condition resulting from the combination of $\text{unlimited wants}$ and $\text{finite resources}$, as illustrated in Figure 1.1.

Finite resources

Resources that are limited in every country, requiring governments, firms, and individuals to make decisions about their allocation.

Unlimited wants

The infinite desires of individuals, governments, and firms that exceed the available resources in an economy.

Workers' scarcity

A situation where available jobs are limited compared to the number of people seeking employment, forcing workers to make choices regarding pay, relocation, or education.