The document identifies the basic economic problems as scarcity and how to allocate limited resources. It describes three fundamental economic questions: how to produce, what to produce, and for whom to produce. It then discusses different economic systems - traditional, command, market, and mixed - that address how societies can most efficiently respond to the basic problems of scarcity and resource allocation.

1. what are the basic economic problems and
how to address them?
TARGET:
* identify the basic problems of an economy
* decribe different economic systems
* address basic ecinomic problem

2. ● Is a social science which is the study of how people interact with each other
-key concept: people think! we are not robots so our individual behavior is not always
predictable, But large group behavior is actually quite predictable and therefore “studyable”
● this is what economists used to study our behavior
Economic

3. BASIC ECONOMIC PROBLEMS
The fundamental
economic problem
is the issue of
scarcity and how
best to produce and
distribute these
scare resources.
SCARCITY?
Scarcity means there is a finite supply of goods and raw materials.
Finite resources
mean they are
limited and can
run out.
Unlimited wants
mean that there
is no end to the
quantity of goods
and services
people would like
to consume
Because of
unlimited wants –
People would like
to consume more
than it is possible
to produce
(scarcity)

4. 3 Fundamental economic question
How to produce?
For whom to produce?
- This question pertains to what goods and services
a society must produce to satisfy human wants and
needs
- this question pertains to the methods, machines,
or materials to use in production.
-This is also called the “problem of distribution”
whereby a society must determine who will benefit
from its production output
What to produce?

5. CHOICE
• Understanding that people make choices is key to
understanding and studying economics.
• since people do not have inifinite incomes, they make
choices whenever they purchase goods and services.
• they have to make decision on how to allocate their limited
financial resources and so always need to chose between
alternatives.
• this leads to opportunity cost.

6. OPPURTUNITY COST
OPPORTUNITY COST is simply what you give up in order to
have something else.
eg. if you buy a bike instead of iphone the opportunity cost of
your bike is the iphone.

7. Economic System
Traditional economy 1
command economy 3
mixed economy 4
2
market economy

8. Economic system
-its decide how their scarce resources efficiently.
-the means through wich societies determine the response to
basic economic problem . the way they trade goods and
services and distribute scarce resources reflects the type of
economic system they have adopted.

9. TRADITIONAL ECONOMY
RELY ON AGRICULTURE, FISHING, HUNTING, AND
GATHERING TO FIND FOOD TO SUPPORT THEM.
THE PRIMARY GROUPN FOR WHOM GOODS AND
SERVICES ARE PRODUCED IS THE TRIBED OR FAMILY
GROUP.

10. COMMAND ECONOMY
-advocating the marxist movements where the government
control all major aspects of the economy.
-Govern by the goverment.

11. MARKET ECONOMY
-also known as free market
-it is where the law of supply and demand
influences the production of goods and
services.

12. MIXED ECONOMY
-combination of two or more types of economic system
-the idea of this is to use the best of both free markets
and goverment intervention.