• The?basic economic problem?is that resources are?scarce
  • There are?finite resources?available in relation to the?infinite wants and needs?that humans have
  • In economics, these resources are called the?factors of production
  • Due to the problem of scarcity,?choices have to be made?by producers, consumers and governments about the best?(most efficient)?use of these resources
• Economics is the study of scarcity and its implications for resource allocation in society
• In a free market,?scarcity?has a direct?influence on prices
  • The?scarcer?a resource, the?higher?the price for it will be
  • The?less scarce?a resource, the lower?the price for it will be

• Resources?can either be?renewable?or?non-renewable
• • Renewable resources?can be?used repeatedly and naturally replenished,?for example wind generated electricity
  • Non-renewable resources?cannot be naturally replenished?at a pace that keeps up with consumption. For example, oil and coal

• Opportunity cost is the loss of the next best alternative when making a decision
• Due to the?problem of scarcity,?choices?have to be made?about how to best?allocate limited resources amongst competing wants and needs
• There is an?opportunity?cost?in the allocation of resources
  • When a?consumer?chooses to purchase a?new phone, they may be?unable to purchase new jeans. The jeans represent the loss of the next best alternative?(the opportunity cost)
  • When a?producer?decides to allocate all of their resources to?producing electric vehicles, they may be?unable to produce petrol vehicles. The petrol vehicles represent the?loss of the next best alternative?(the opportunity cost)
  • When a?government?decides to?provide free school meals?to all primary students in the country, they may be?unable to fund some rural libraries?which may have to close. The libraries represent the loss of the next best alternative?(the opportunity cost)

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