There are many “problems” that economists are interested in. Can you think of some problems that economists may try to solve?

The Economic Problem

The economic problem: Scarcity – People have unlimited wants, but limited resources.

Task

List the ten things that you consider to be your primary wants (i.e. the things that if you could only have ten things you would want these first of all (maybe water would be one 😉)

Task (Scarcity)

In Economics, resources are classified into 4 types, which we call factors of production. These are:

• Land;
• Labour;
• Capital; and
• Entrepeneurship.

What is an opportunity cost?

Task (Opportunity Cost)

Different Economic Systems

What is the difference between a market economy, a centrally planned economy, and a mixed economy.

Marginal Analysis

Economists often talk about margins. What is a margin, and why is it important?

Positive and normative statements

Economists distinguish clearly between positive statements which are descriptive and make no judgement about whether something is good or bad and normative statements which are value judgements and might use words like “should”.

Summary

We can summarise a lot of these concepts by combining them and saying that because of scarcity, economic agents must make a choice and this leads to an opportunity cost. To minimise this cost they must decide what to produce, how to produce it and for whom. This leads to specialisation and the surplus from specialisation gives incentives trade which requires markets.