Scarcity – The Economic Problem (AS/A LEVELS/IB/IAL)

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

Scarcity – The Economic Problem

Scarcity exists due to a finite amount of resources and unlimited wants.

The economic problem stems from the idea that people have unlimited wants but they only have a finite (limited) amount of resources.

Consumers, producers and the government have to make choices. When a choice is made there is an opportunity cost associated with this choice.

Opportunity Cost

Opportunity cost is the next best alternative forgone.

• E.g. A consumer could be faced with the choice of spending £10 on buying a train ticket or buying a revision book for economics.
• If the student chooses to buy the train ticket he is unable to buy an economics revision book.
• However, if the consumer chooses to buy the revision book he will have to forego (give up) buying the train ticket.

Quick Fire Quiz – Knowledge Check

1. Define scarcity (2 marks)
2. What are the four factors of production? (4 Marks)
3. Define opportunity cost (2 Marks)

Next Revision Topics:

• Opportunity Cost
• Supply
• Factors of Production
• PPF Curves
• Demand

A Level Economics Past Papers

• AQA
• Edexcel
• OCR
• WJEC