Sample Cheat Sheets: The Nature of The Economic Problem
1.1 The Nature of the Economic Problem
1.1.1 Finite Resources and Unlimited Wants
- Economic Problem: Scarcity → resources are limited, wants are infinite.
- Key Idea: Choices must be made → leads to opportunity cost.
Contexts of Scarcity:
| Group | Scarcity Example | Choice Needed |
|---|---|---|
| Consumers | Limited income vs unlimited wants | Buy phone or laptop? |
| Workers | Limited time/skills | Work overtime or study? |
| Producers | Limited raw materials/machinery | Make cars or buses? |
| Governments | Limited tax revenue | Build hospitals or roads? |
- Opportunity Cost: The next best alternative forgone when a choice is made.
- Example: If government spends money on defense, opportunity cost may be fewer hospitals.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course
1.1.2 Economic Goods and Free Goods
| Type of Good | Definition | Examples | Key Feature |
|---|---|---|---|
| Economic Goods | Goods made with scarce resources; involve opportunity cost | Clothes, cars, houses | Scarce + have price |
| Free Goods | Goods not scarce, available without opportunity cost | Air, sunlight, seawater (in most places) | Not scarce + no price |
- Economic Goods require resources → producing more of one means less of another.
- Free Goods are abundant → no sacrifice is needed.
Quick Examples
- A worker spending 2 hours on overtime → opportunity cost is 2 hours of rest.
- Government choosing free healthcare → opportunity cost might be less spending on defense.
- Producing 1000 cars → opportunity cost could be fewer buses.
- Free good: breathing air; using more doesn’t reduce availability for others.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course
Key Terms Summary Table
| Term | Definition | Example |
|---|---|---|
| Scarcity | Limited resources vs unlimited wants | Land, labor, capital |
| Opportunity Cost | Next best alternative forgone | Study vs part-time job |
| Economic Good | Produced with scarce resources | Bread, mobile phones |
| Free Good | Abundant, no cost | Air, sunlight |
Memory Tricks
- Scarcity = Choice = Opportunity Cost.
- If it has a price, it’s an economic good.
- If it’s abundant and free, it’s a free good.
- Consumers, workers, producers, governments → all face the same basic problem of scarcity.
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Economics Full Scale Course