All individuals, business and economies must decide how they will use their scarce resources to satisfy their unlimited needs and wants. Making decisions about how we will use resources is known as resource allocation . Our society has developed an economic system to make choices that will solve the basic economic problem. Remember, that basic economic problem is scarcity. An economic system is simply the way we organise the production and distribution of our goods and services. All economic systems must answer three basic economic questions: what to produce? how to produce? for whom to produce? These questions are summarised in FIGURE 3 .
SkillBuilder discussion Investigating 1. Think of and list some of the weird and wonderful things that you can buy.
2. How do you think
businesses decide on what to produce?
FIGURE3 All economic systems must answer three basic economic questions.
Three basic economic questions
2. How to produce?
3. For whom to produce?
1. What to produce?
• Decisions must be made about what goods and services are to be produced and in what quantities. • Should we produce cars or trucks, televisions or radios, beef or lamb and how many of each?
• Decisions must be made about how we produce goods and services. • Do we use mostly labour or do we make use of technology and machinery?
• Decisions must be made about who will get the goods and services produced. • Does the first person in line get the good or service? Do goods and services go to those who need them the most?
Being an active participant Being an active participant in the economy isn’t just about having a job or running a business, it’s about being engaged and making informed choices that impact both your personal ýnancial health and the broader economic landscape. Whether you’re working, operating a business or simply making day-to-day ýnancial decisions, your actions contribute to the vitality and stability of the economy. To be an active participant, consider the roles you play: as an employee, you contribute through your labour and skills; as a business owner, you drive innovation and create jobs; as a consumer, your spending habits inþuence market trends. Financial literacy is crucial in all these roles, enabling you to make informed decisions, understand the consequences of those decisions, and ultimately, help build a more robust and resilient economy. Embracing this proactive approach not only beneýts you personally but also helps address key issues in Australia and enhances reasoning and problem-solving skills.
536 Jacaranda Humanities Alive 7 Victorian Curriculum Third Edition
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