1. The Economic Problem & Economic Resources
AS Economics Unit 1

2. Aims and Objectives Aim:
To understand the nature of the economic problem and economic resources.
Objectives:
Define the economic problem and opportunity cost.
Describe the factors of production.
Analyse the effects of inefficient allocation of resources.

3. Starter Discussion
Discussion: Is it inevitable and fair (due to the scarcity of resources such as water) that some countries are poor and others are wealthy?

4. Economic Problem Solving
An Economic System attempts to solve the
following problems:
What should we produce?
How should we produce it?
For whom should it be produced?

5. Economic Activity Definition: The activity between people, businesses,
organisations or nations which involves trade.
Examples include:
Shopping
Trade between nations
Bartering for goods and services
DIY
Car boot sales
Charity Work.
Drug Trading

6. Scarcity
There is not enough resources to meet everyone's wants and needs, this is scarcity.
The economic problem is therefore that there are infinite wants and limited resources.
Hence we have rich people and poor people, rich countries and poor countries.

7. What is the next best good or service for each of the following:
Opportunity Cost
What is the next best good or service for each of the following:
Petrol

8. Opportunity Cost
Each choice you make will carry a cost, the alternative that is given up as a result. Definition: The next best alternative forgone (given up) when an economic decision is made. Eg. Deciding on AS Levels or GCSEs

9. Economic Goods & Free Goods
Economic goods are goods which have an opportunity cost attached to them.
Free goods are goods for which there are no opportunity costs. E.g. Air
Discussion:
With the worlds population growing so fast, and with pollution levels increasing is clean air a scarce good and does it have an opportunity cost?

10. Economic Resources
Land
Labour
Capital
Enterprise

11. Goods like minerals, land, and all the resources we take from it.

12. Labour
This includes all of the potential workforce, but includes not just the physical people, but their skills, intelligence and abilities.

13. Capital
Stock of goods used to make other goods/services. Includes computers, machinery and railways.

14. Enterprise
Refers to risk takers who are prepared to work to bring the other three factors of production together to make goods and services.

15. Factors of Production FACTORS OF PRODUCTION Land Labour Capital
Output of goods or services for sale in markets
Land
Enterprise
Capital
Labour
FACTORS OF PRODUCTION
A firm, business or enterprise

16. Rent
Wages
Interest
Profit
Rewards or Payments

17. Non-Renewable and Renewable Economic Resources
Problems
Non-renewable such as oil and coal.
Renewable such as wind or solar.

18. What happens when the oil runs out?