Author: Juan Anthonio Kambuno
1.     The Basic Economic Problem: unlimited wants and needs that can not be met because there are limited factor of production. This create SCARCITY.

ü  Needs: is a good or services which is essential living.
Examples:
Ø  Water
Ø  Food
Ø  Shelter
ü  Wants: Is a good or services which is people would like or want far more than they need.
Examples:
Ø  Cars
Ø  Smartphones
Ø  Holiday
Ø  Fashionable
Ø  Clothes

2.     BUT… Resources are Limited
ü  Resources: Are used to produce good and services to satisfy our wants and needs.
Examples:
Ø  Material
Ø  Energy
Ø  Service
Ø  Knowledge

3.     FACTOR OF PRODUCTION : Means resources process into goods and services to satisfy wants.
ü  LAND: Natural resources.
Examples:
Ø  Wood
Ø  Oil
Ø  Gold
Ø  Coal
Ø  And so on…
ü  LABOUR: people who work with their hands and use their brains to help make goods and services.
Examples:
Ø  Doctor
Ø  Constructor
Ø  Teacher
Ø  And so on…
ü  CAPITAL: Human-made resources used to produce goods and services.
Examples:
Ø  Tools
Ø  Machinery
Ø  Factory
Ø  And so on…
ü  ENTREPRENEUR: Person who combines and organizes resources to produce goods and services. Entrepreneur have enterprise which is willing to take risks starting and running firms.

4.     Exchange: Costumers able to buy goods and services and exchange with money.
There are four main categories:
v Consumer goods and services: Any good that satisfies consumers’ wants.
o   Durable consumer goods: Can be used for long time.
Examples:
Ø  DVD Players
Ø  Cars
Ø  Washing machine
o   Non-Durable Consumers Goods: Used quickly.
Examples:
Ø  Food
Ø  Drink
Ø  Cosmetics
Ø  Soap
o   Consumer Services: Someone doing something for us to satisfy our needs and wants.
Examples:
Ø  Doctor
Ø  Banker
Ø  Policeman
Ø  Farmer
v Capital Goods: Used by firms to produce other goods and services.
Examples:
Ø  Shop
Ø  Factory
Ø  Vans
Ø  Truck
v Public Goods: Goods and services which are provided by a government to the residents, even if they do not pay for them.
Examples:
Ø  Defence
Ø  The police
Ø  Law and order
Ø  Protection of the environment
Ø  Lighthouses
Ø  Street lightning
Ø  Roads
v Merit Goods: Merit goods are those goods and services that the government feels that people will under-consume, and which ought to be subsidised or provided free at the point of use so that consumption does not depend primarily on the ability to pay for the good or service.

Scarcity: We cannot satisfy our wants and goods for survive.
And we must make a choice because scare resources can be used in many ways.
Scare resources have alternative uses.
5.     Opportunity Cost: Something is what you have to give up to get it.
Examples:
Ø  You have $10 to buy apple or orange, only one. Actually you really want apple, but you also want orange and you don’t have enough money. If you choose apple, you have to give up orange. The opportunity cost is orange.
Ø  A group of business owners choose to invest $5 million in building a new hotel. They could have invested their money in a car hire business instead but thought the hotel venture would earn them more profit.