Wants and Needs

Want: what people want, unlimited
Need: basic needs, e.g.: food, water, security, shelter

Goods and Services

Services: activities, intangible
Goods: physical, tangible

Economic Goods

  • Goods have a price, can obey laws of economics. (means they are scarce)
  • Require factors of production to create. Because they need FOP, the cost of the FOP can be used to determine the price.
  • Have opportunity cost.

Free goods

  • No FOP required, means no need for production, already available.
  • Because the FOP is not required to produce this good, it’s challenging to assign a price or an opportunity cost.
  • It depends on
  • This is “not” something that is free
  • “no price” or difficult to price
  • e.g. air,  forest, sea

Basic economic problem

[!def] Scarcity: Infinite(Unlimited) wants + Finite(Limited) resources

[!def] The situation of scarcity of resources can’t satisfy everyone’s needs and wants.

Economic Agents

Scarcity -> choices -> what, how, for whom to produce

individuals: maximise utility
firms: maximise profit
governments: maximise welfare

Opportunity cost

[!def] the next best alternative that is sacrificed/forgone in order to satisfy the other

sectors of industry

Primary (Agrarian)
Secondary (Industrialised)
Tertiary (Developed/Services)

chain of production

  • the Value Adding process
  • the Transformation process

[^fop]:: Factor of production