1. The Economic Problem Needs – the essentials of life, such
as food and shelter
Wants – desires for non-essential items
Economic Problem – the problem of having unlimited wants, but limited resources to satisfy them
Scarcity – the limited nature of resources, which underlies the basic economic problem
Economic Resources – basic items that are used in all types of production, including natural, capital, and human resources

2. Natural Resources – the resources from nature
Natural Resources – the resources from nature that are used in production, including land, raw materials, and natural process
Capital Resources – the processed materials, equipment, and buildings used in production; also known as capital
Human Resources – the efforts of people involved in production, including labour and entrepreneurship
Economics – the study of how to distribute scarce resources among alternative ends

3. Economic Choice Utility – the satisfaction gained from any action
Self-interest motive – the assumption that people act to maximize their own welfare
Opportunity Cost – the utility that could have been gained by choosing an action’s best alternative
Free Goods – items that are so plentiful that they do not have any cost
Economic value – the opportunity cost of product

4. Economic Systems Basic economic questions
What to produce?
How to produce?
For whom to produce?
Economic system - the organization of an economy, which represents a country’s distinct set of social customs, political institutions, and economic practices
Traditional economy – an economic system in which economic decisions are made on the basis of custom
Market economy – an economic system based on private ownership and the use of markets in economic decision-making

5. Command economy – an economic system based on public ownership and central planning
Modern mixed economy – an economic system that combines aspects of a market economy and a command economy
Production decisions are made in both private market and by government
Traditional mixed economies – economic systems in which a traditional sector co-exists with modern sectors
Laissez faire – the principle that governments benefit society the most by not interfering in economic activity
Market – a set of arrangements between buyers and sellers of a certain item

6. Economic Goals Economic Efficiency Income Equity Price Stability
Full Employment
Viable Balance of Payments
Economic Growth
Environmental Sustainability