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

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

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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.
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