1.1 A need is necessary for survival but a want is something that is not needed for survival. Resources are used to produce goods and services to satisfy these needs and wants. They include natural resources (land, soil, timber), human resources (farm workers, factory managers) and manufactured resources (robots, tractors, factory buildings).
Key terms Needs – goods or services necessary for survival Wants – goods or services not necessary for survival
Some of these are finite resources, which means that there is a limited amount available in the world and they will eventually be used up. Examples of finite resources are oil, coal and uranium. Other resources are renewable resources, which means that they can be replaced. Examples are timber, fish, grain and meat. However, if we use these resources faster than they are being renewed or replaced then they will run out as well. For example, if fish are caught in too large numbers then there will not be enough fish left in the oceans to replace those caught. This would mean that fish are no longer renewable and will eventually die out. This is why it is so important today that resources are replaced at the same rate as they are being used. For example, new trees can be planted to replace those that have been cut down for timber. Both finite and renewable resources are used to produce goods and services. However, there are never enough of these resources, even the renewable ones, to produce all the goods and services to satisfy everyone. This is because people, or consumers, have unlimited wants.
The economic problem The economic problem is that there are limited resources and unlimited wants, which leads to a problem of scarcity. Scarcity means there is a lack of resources available to produce all the goods and services to satisfy these unlimited wants. Therefore, choices have to be made about what goods and services to produce, how to produce the goods and services and who will be able to consume those goods and services (this is covered in more detail in Unit 2.2). The economic problem applies to more than just consumers. It applies to all areas of the economy, as shown in Figure 1.1.1. Worker (a person who works for a producer)
Consumer (a person who buys goods and services to satisfy their wants)
Additional wages from overtime or use the time to go to the cinema?
New car or expensive holiday?
Producer (someone who creates and supplies goods or services) Invest in new machinery or increase training of workers?
Limited resources and unlimited wants leads to choices having to be made
Government (the group of people who officially control a country) New school or new hospital?
Figure 1.1.1 The economic problem applies to all areas of the economy
Key terms Finite resources – nonrenewable resources that will eventually run out Renewable resources – resources that can be replaced as they are used to produce goods and services Unlimited wants – there is always something else that people would like and so people are never satisfied The economic problem – how can scarce economic resources be most effectively used to satisfy people’s unlimited needs and wants? Scarcity – a lack of goods and services available to satisfy unlimited wants
Unit 1.1: The nature of the economic problem
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