Igcse Economics Chapter 1 - Basic Economic Problem Revision Notes

951 Words4 Pages
In this chapter, candidates should be able to: • Define the nature of the economic problem (finite resources and unlimited wants) • Define the factors of production (land, labour, capital, enterprise) • Define opportunity cost and analyse particular circumstances to illustrate the concept • Demonstrate how production possibility curves can be used to illustrate choice and resource allocation • Evaluate the implications of particular courses of action in terms of opportunity cost. 1. SCARCITY, CHOICE AND OPPORTUNITY COST 1. Unlimited Wants Human beings, in order to survive need a lot of things. Some of these things are very important for our existence. For example, food, clothing, water, shelter and air. These things can be classified as Needs. Apart from this there are things which are needed by us but they are not important for our survival and we can live without them also. For example, going on an expensive holiday, owning a 57 inches Plasma TV. These are known as Wants. This list is never ending and is continuously increasing. 2. Limited Resources On the other hand, we have limited resources to produce these goods and services we want. There are not enough car factories to provide cars to everybody on earth. Everything on this planet has some limits except for our Wants. When unlimited wants meet limited resources, it is known as Scarcity. 3. Alternative Uses All the resources we have on this planet can be utilised in a number of way. They have alternative uses. For example, a piece of land can be used for making a factory, or doing farming or constructing a school and so on. Therefore, we have to choose what is best for us. If we talk from an economist point of view it means ‘making the optimum use of resource available’. 4. Opportunity Cost Though we have alternative uses, we have to select the best way to use these resources. When we choose best

More about Igcse Economics Chapter 1 - Basic Economic Problem Revision Notes

Open Document