A summary of:
- Economics as a social science
- Functions of money
- Assumptions and models
- Factors of production & Economic agents
- Specialisation and the Division of labour.
- Types of economies
, The Economic Problem
Economic Problem = How do we satisfy unlimited wants and needs with finit
resources?
Scarcity = a situation that arises when people have unlimited wants & needs i
the face of limited resources we need to make choices.
i.e. economies have to allocate resources as efficiently as possible due to the
imbalance of what we can feasibly produce & what we wish to consume.
HOWEVER this means each choice comes with an opp cost = the value of the
benefit of the next best alternative foregone in an economic choice.
Exception: free good = a good without an associated opp cost because it is
unlimited in supply & has no production cost freely available.
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