Three Basic Economic Questions and Types of Goods & Services

Vocabulary flashcards covering the core concepts from the lecture on the three basic economic questions, types of goods and services, scarcity, and related ideas.

Three basic economic questions

The trio of decisions every society must make: what to produce, how to produce, and for whom to produce.

What to produce

The decision about which goods and services a society should generate based on needs, wants, and available resources.

How to produce

The method of production, including choices between labor and automation, and the use of capital or technology.

For whom to produce

How goods and services are allocated to people, often influenced by income, prices, and demographics.

Capital goods

Goods used to produce other goods or services (e.g., machinery, equipment); can also be consumer goods in some cases.

Consumer goods

Goods purchased by individuals for personal use and consumption.

Durable goods

Goods that last three years or longer.

Nondurable goods

Goods that last less than three years.

Services

Intangible economic outputs—tasks performed by people, such as teaching, medical care, or legal services.

Scarcity

The fundamental economic problem of limited resources versus unlimited wants, requiring choices.

Automation vs. human labor

Decisions about using machines or people in production, influenced by unemployment, costs, and incentives.

Target market / Demographics

The characteristics of the group a producer aims to serve (age, income, preferences) used to tailor production.

Economic systems

Ways countries answer the three questions, reflecting different levels of government involvement and resource allocation.