BEDIR INTERNATIONAL HIGH SCHOOL

2022/2023 ACADEMIC YEAR

ECONOMICS
FORM 1

PRESENTED TO: BEDIR STUDENTS FORM 1 CLASS (TERM 1-2022/2023)

PRESENTED BY: MR. KEFA MWALE

SECTION 1: THE BASIC ECONOMIC PROBLEM

WEEK 1 AND 2

TOPIC: THE NATURE OF THE ECONOMIC PROBLEM

Economics is the study of how resources are allocated to satisfy
the unlimited needs and wants of individuals, governments and
firms in an economy.
 In every country, resources are limited in supply and decisions
have to be made by governments, firms (businesses) and
individuals about how to allocate scarce resources to satisfy
unlimited needs and wants.
 This is the basic economic problem that exists in every
economy: how to allocate scarce resources to satisfy unlimited
needs and wants

Economic agents- are households, firms that operate in private

sector and the government.
The three main economic agents or decision-makers in an
economy are:
• individuals or households
• firms (businesses that operate in the private sector of the
economy)
• the government.
PRIVATE AND PUBLIC SECTOR
The private Sector refers to the part of the Country’s overall
economy which is controlled by Individuals or Private
Companies.
 Public Sector refers to the part of the Country’s overall economy
which is controlled by the Government or various Government
bodies.
The three basic economic questions addressed by economic
agents are:
l What to produce.
2 How to produce it.
3 For whom to produce it.
 Firms and individuals produce goods and services in the private
sector of the economy and the government produces goods and
services in the public sector.
 Governments, firms and individuals both produce and consume
goods and services.
 For example, the government might provide education and
health care services for the general public.
GOODS AND SERVICES
Goods are physical items such as tables, clothing, toothpaste
and pencils.
Services are non-physical items such as haircuts, bus journeys,
telephone calls and internet access.
NEEDS AND WANTS.
Needs are the essential goods and services for human survival.

Examples of Needs
  Nutritional food
 clean water
 shelter
 protection
 clothing
 access to health care
 Education.

Wants are goods and services that are not necessary for
survival.
 An individual's wants, or desires, tend to be unlimited as most
people are rarely satisfied with what they have and are always
striving for more.
 Wants are a matter of personal choice and human nature.
Examples of wants

 Computers
 Cellphones
 Vehcles
 Wrist watch
Economic Problem
 There are too few productive resources to make all the goods
and services that consumers need and want.
 Unlimited wants and limited resources
 Scarcity of resources is the basic economic problem
 UNLIMITED WANTS AND LIMITED RESOURCES
There are two halves of scarcity
 Limited resources.
 Unlimited wants.
What we want and need has no limit, i.e., it is infinite. However,
what we can afford is finite, i.e., it has a limit. This is a basic
condition of human existence.
 We are never completely satisfied with everything we consume.
 We consume a variety of goods and services, but they are never
enough. In other words, there is always something else that I,
you, or anybody else would want or need.
 The term applies to all socioeconomic groups. Low-income
groups have limited resources, and their wants always exceed
those resources.
 However, the same happens with middle-income and upper-
income groups. They never feel they have enough.
 The reason is a very simple one. Every income group’s
resources are finite.
 However, unlimited want is a feature of every human. Put simply;
our wants and needs are infinite, but our wealth is not.
The economic problem – unlimited wants
 Each of us faces the so-called ‘economic problem’ this is
because we do not have the income to satisfy all of our wants.
 It leads to a situation of scarcity. The economic problem affects
individuals, businesses and government, none of which has the
resources to meet all of their needs.
 Scarcity is the lack of sufficient products to fulfil the total wants of
the population.
‘The economic problem ‘is a term that economists use. It states
that the finite resources of an economy are not enough to satisfy
all our wants and needs.
 It is also called ‘the central economic problem ‘or ‘the basic
economic problem.’

“How do we satisfy unlimited wants with limited resources?”

As we cannot produce everything, we have to prioritize. We must
decide what to produce, how to produce it, and how much to
produce.
 We must also determine for whom to produce.
 Human wants are constant and infinite, but the resources to
satisfy them are finite.
 The resources cannot exceed the amount of human and natural
resources available.
 We produce things that we know people want, as long as we
have the resources to make them.
 How strong or weak demand is determines how much we charge
for those things. It also determines how much we produce
(supply).
What is unlimited wants and limited resources?
It means that people never get enough, that there's always
something else that they would want or need.
 Unlimited wants and needs are one half of the fundamental
problem of scarcity that has plagued humanity since the
beginning of time.
 The other half of the scarcity problem is limited resources.
 “Unlimited wants essentially mean that people never get
enough, that there is always something else that they would like
to have.”
 “When combined with limited resources, unlimited wants
result in the fundamental problem of scarcity.”
Why are resources limited?
 Because the economy has a finite amount of labor, capital, land,
and entrepreneurship that it can use for production
Types of goods
 Economic goods
 Free goods
An economic good is one that is limited in supply, such as oil,
wheat, cotton, housing and cars.
Free goods are unlimited in supply, such as the air, sea, rain
water, sunlight and public domain web pages.
 Economic goods: A good or service that has a degree of
scarcity and therefore an opportunity cost.
 Free goods: A good or service that is not scarce and is
available in abundance. For example, the air we breathe.
Economic goods and free goods
 Almost everything that is provided is an economic good.
 This is because resources are required to produce such goods –
these resources include raw materials, labour and business
know-how.
 Free goods are different – no resources are required to produce
such goods.