Basic Economic Problems of Society Lesson Note
Learning Objectives
This SS1 Economics lesson note covers Basic Economic Problems of Society for First Term, Week 5.
Lesson Note
Learning Objectives
At the end of the lesson, students should be able to:
1. Explain the meaning of basic economic problems.
2. State the origin or causes of economic problems.
3. Identify and analyse the basic economic problems of society
4. Suggest possible solutions to economic problems.
5. Explain the meaning of an economic system
6. Distinguish between the different types of economic systems.
A. Meaning of Basic Economic Problems
Basic economic problems are the fundamental problems faced by individuals, firms and governments in trying to satisfy human wants with limited resources. The problems arise because human wants are unlimited, while the resources available to satisfy those wants are limited and have alternative uses.
2. Origin/Causes of Economic Problems
The basic economic problems of society originate mainly from the following:
i. Unlimited Wants
Human wants are numerous and cannot be completely satisfied. After satisfying one want, another usually arises.
ii. Scarcity of Resources
Resources used to produce goods and services are limited in relation to human wants.
Examples of scarce resources include:
Land ,Labour, Capital and Entrepreneur
iii. Alternative Uses of Resources
Resources can be used for different purposes.
iv. Choice
Because resources are scarce, individuals and governments must choose which wants to satisfy first.
B. Basic Economic Problems of Society
The basic economic problems can be grouped into four major questions:
1. What to Produce?
Society must decide which goods and services should be produced and in what quantity in order to meet the pressing needs of the people.
Factors that determine what to produce
i. consumers needs
ii. market demand
iii. consumers income
iv. type of economy
2. How to Produce?
Society must decide which method or combination of resources should be used in producing goods and services.
There are two major methods:
i. Labour-intensive method: Uses more human labour.
ii. Capital-intensive method: Uses more machines and equipment.
3. For Whom to Produce?
All goods and services produced must get to the final consumer's production. Is not complete until the goods and services get to the final consumers
Factors which determine who to produce for
i. satisfaction of wants
ii. level of income
iii. type of economics system
4. Efficiency of resources used:
Refers to the optimum use or combination of factors of production to achieve higher and better output at a reasonable cost
Factors which determine efficient use of resources
i. Quality of labour: skilled labor unlike the unskilled labour used in production could contribute to efficiency and allocation of resources in production
ii. techniques of production,,: the use of machine may produce more goods save time and reduce stress while labour in tensive may take time
C. Possible Solutions to Economic Problems
Although economic problems cannot be completely eliminated, they can be reduced through the following measures:
i. Proper Allocation of Resources
Resources should be allocated to their most important uses.
ii. Effective Planning
Government and private organisations should plan carefully before committing scarce resources.
iii. Prioritisation of Wants
Individuals and governments should arrange their wants according to importance.
iv. Efficient Use of Resources
Resources should be used efficiently to reduce waste.
v. Increased Production
Production of goods and services can be increased through improved technology, skilled labour and adequate capital.
D. Meaning of Economic System
An economic system is the method or arrangement through which a society or nation organises the production, distribution and consumption of goods and services for the satisfaction of human wants
There are three types of economic systems are:
1. Capitalist economic system
2. Socialist economic system
3. Mixed economic system
Types of Economic Systems
1. Capitalist Economic System
A capitalist economy is an economic system in which the means of production are mainly owned and controlled by private individuals and organisations.
Features
I. Private ownership of property.
II. Profit motive.
Example:
The United State, Japan, Australia, France and Italy are commonly regarded as having a predominantly capitalist economy.
2. Socialist Economic System
A socialist economy is an economic system in which the major means of production are owned and controlled by the state.
Features
i. State ownership of major resources.
ii. Government planning.
iii. Government plays a major role in determining production and distribution
3. Mixed Economic System
A mixed economy combines elements of both capitalism and socialism. Both the private sector and government participate in economic activities.
Features
i. Both private and public ownership exist.
ii Individuals can own businesses.
iii. Government regulates private businesses.
Example: Nigeria, Tanzania, and Egypt operate a mixed economic system.
Evaluation
OBJECTIVES QUESTIONS
1. Which of the following is a basic economic problem of society?
A. What to produce?
B. How to advertise?
C. Where to sell?
D. How to package?
2. The question “How to produce?” is concerned with ______.
A. who will consume the goods
B. the method of production to be used
C. the price of goods
D. the quantity consumers needs
3. The economic problem arises mainly because ______.
A. resources are unlimited
B. wants are limited
C. resources are scarce and wants are unlimited
D. goods are always available
4. Which of the following can help to reduce economic problems?
A. Wastage of resources
B. Proper allocation of resources
C. Unplanned consumption
D. Overproduction of unwanted goods
5. One important way of solving economic problems is through ______.
A. effective economic planning
B. wasting scarce resources
C. ignoring people's needs
D. increasing unnecessary wants
6. An economic system in which the means of production are mainly owned by private individuals is called ______.
A. socialist economy
B. capitalist economy
C. traditional economy
D. communal economy
7. Which economic system is mainly based on government ownership and control of major means of production?
A. Capitalist
B. Mixed
C. Socialist
D. Traditional
8. An economic system that combines features of capitalism and socialism is known as ______.
A. traditional economy
B. mixed economy
C. barter economy
D. subsistence economy
9. Which of the following is a major difference between capitalism and socialism?
A. Capitalism encourages private ownership, while socialism emphasises state ownership.
B. Both systems prohibit government participation.
C. Both systems are based entirely on tradition.
D. Socialism encourages only private ownership.
10. In a traditional economic system, economic activities are mainly guided by ______.
A. customs and traditions
B. profit maximisation
C. government planning
D. international trade
Theory Questions
1a) what are the basic economic problems
1b) list the basic economic problems
2a) State three possible solutions to the basic economic problems
2b) define: i) want ii) scarcity iii). chioce