Three Basic Economic Questions Class Notes

Choices People in any economy face major economic decisions due to: Unlimited wants Limited resources THIS SITUTATION IS CALLED SCARCITY

1. What goods and services should be produced? In what amount? Why? Producers make choices about how to use their resources Based on many factors: Amount of resources Cost of resources Amount of product they think will sell

2. How to produce these goods & services? Usually want to choose combination of resources that will be least expensive Technology: usually causes a decrease in the costs of production

3. Who gets the goods and services that are produced? Wants are greater than the resources available to satisfy them Potential solutions: Divide equally Small group decides Produce more to have more goods

Answers Answers to these questions reflect the goals and values of the society

Answers Value Economic Answer Equality Share resources equally Freedom Let citizens compete freely for resources and goods