Summary
Summary 1.1.3 The economic problem
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The main economic problem, types of resoruces - renewable and non renewable, opportunity cost, factors of production
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The main problem of economics is scarcity.There are unlimited wants and needs, however only limited resources
World only has nite resources
Two Main Types of Resource:
◦Renewable
‣ Can be replenished for future generations to enjoy
◦Non-renewable
‣ A resource that cannot be replenished to be enjoyed by future generations
Opportunity Cost:
◦The next best alternative foregone when making a decision
◦E.g PS4 or Xbox
Factors of Production:
◦Land:
‣ All natural physical resources
◦Labour:
‣ Human input
◦Capital:
‣ Capital goods are used to make other consumer goods and services in the future
• E.g machinery
‣ Consumer goods are sold directly to consumers
• E.g IPhone
‣ Infrastructure is included under capital as a factor of production
• E.g broadband, roads
◦Enterprise:
‣ The ideas behind the business and the risks
Restaurant:
◦Land - land on which it is built
◦Labour - employees/waiters/chefs
◦Capital - ovens/plates/fridges
◦Enterprise - entrepreneur who started the restaurant
1. Opportunity cost is the next best alternative foregone when making a decision. For example
choosing to spend more on defence rather than social protection
2. I would have spent far less on defence and invested the savings into health and education
3. Possible bene ts of my budget would have been that the economy would have bene tted from a
more well educated workforce and a healthier workforce, however the country would have been left
vulnerable due to a lack of defensive investment
4. I think that the government should spend about half as much money on defence, and invest £10mil
into education and £10mil into healthcare.
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