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1.1 The basic economicproblem

Lesson 1

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Machinery Natural Resources

Resources are scarce

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PeopleLand

Resources are scarce

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Family A Family B

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Why do we want what we want?

Think of five things you want Discuss with your partner the ost

popular reasons for wanting goods andservices!

The creation of wants

WANT REASON

BICYCLE MY FRIEND HAS ONE

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Production

"sing inputs #resources$ to ake outputs #goods andservices$ to satisfy the needs and wants of consu ers

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Factors of production Natural resources % land Man& ade resources % capital

'u an skills and effort % la(our )usiness know&how % enterprise

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Consumption

"sing up goods and services #products$ to satisfyconsu ers* needs and wants

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So we all ha!e to ma"e choices

There is a li ited a ount of resources such as raw aterials+achines+ factories and skilled workers! )ut there are a nu (erof different ways in which they can (e used!

Resource allocation therefore involves deciding how (est to usescarce resources to satisfy as any needs and wants as possi(le

C H O I C E C H O I C E

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Lesson #

1.# The basic economicproblem continued

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Choice,i ilarly+ people and govern ents only have a li ited a ountof oney (ut have any needs and wants to satisfy

$100

-ood? .ntertain ent?

/lothing?

Defence? 'ealth care?

Roads?

$100bn

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$pportunity cost0pportunity cost is the cost of choice

What would you (uy with 122RM)? 'ow should the govern ent spend ",3452 illion? What occupation will you choose when you finish your studies? 'ow should a new (usiness invest ",342 illion? ,hould we conserve ore natural resources?

and what are the next best alternatives foregone?

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The basic economic problem

'u an wants are unli ited (ut resources are scarce