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1.1 The basic economicproblem
Lesson 1
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MachineryNatural 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 most
popular reasons for wanting goods andservices.
The creation of wants
WANT REASON
BICYCLE MY FRIEND HAS ONE
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Production
Using inputs (resources) to make outputs (goods andservices) to
satisfy the needs and wants of consumers
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Factors of production Natural resources = land
Man-made resources = capital
Human skills and effort = labour Business know-how =
enterprise
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Consumption
Using up goods and services (products) to satisfyconsumersneeds
and wants
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So, we all have to make choices
There is a limited amount of resources such as raw
materials,machines, factories and skilled workers. But there are a
numberof different ways in which they can be used.
Resource allocationtherefore involves deciding how best to
usescarce resources to satisfy as many needs and wants as
possible
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Lesson 2
1.2 The basic economicproblem continued
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ChoiceSimilarly, people and governments only have a limited
amount
of money but have many needs and wants to satisfy
$100
Food? Entertainment?
Clothing?
Defence? Health care?
Roads?
$100bn
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Opportunity costOpportunity costis the cost of choice
What would you buy with 100RMB?
How should the government spend US$250 million?
What occupation will you choose when you finish your
studies?
How should a new business invest US$20 million?
Should we conserve more natural resources?
and what are the next best alternatives foregone?
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The basic economic problem
Human wants are unlimited but resources are scarce
