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1. The basic economic problem

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4 topics · 11 learning objectives

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  1. 1.1. The nature of the basic economic problem

    1. • definition of the basic economic problem • the concept of scarcity • examples of the basic economic problem in the context of: • consumers • workers • producers/firms • governments

    2. • The three basic economic questions which determine resource allocation: • what to produce • how to produce • who to produce for

    3. • the difference between economic goods and free goods

  2. 1.2. Factors of production

    1. 1.2.1Factors of production and their rewards

      • definitions of factors of production: land, labour, capital and enterprise • rewards to factors of production: rent, wages, interest and profit

    2. 1.2.2Quantity and quality of factors of production

      • causes of changes in the quantity and quality of factors of production

  3. 1.3. Opportunity cost

    1. • definition of opportunity cost • examples of opportunity cost in different contexts

    2. • decisions made by consumers, workers, producers/firms and governments when allocating their resources

  4. 1.4. Production possibility curve (PPC) diagrams

    1. • definition • drawing and interpretation of the PPC diagram

    2. • the significance of the location of different production points

    3. • the significance of movements along a PPC and opportunity cost

    4. • causes and consequences of shifts of a PPC in terms of an economy’s growth