Scarcity (Cambridge (CIE) IGCSE Economics)
Revision Note
Finite Resources and Unlimited Wants
The basic economic problem is that resources are scarce
In economics, these resources are called the factors of production
There are finite resources available in relation to the infinite wants and needs that humans have
Needs are essential to human life, e.g. shelter, food, clothing
Wants are non-essential desires, e.g. better housing, a yacht etc.
Due to the problem of scarcity, choices have to be made by producers, consumers, workers and governments about the best (most efficient) use of these resources
Economics is the study of scarcity and its implications for resource allocation in society
All Stakeholders in an Economy Face the Basic Economic Problem
Consumers | Producers | Workers | Government |
---|---|---|---|
|
|
|
|
Economic and Free Goods
Economic goods are scarce in relation to the demand for them
This makes them valuable
Due to their value, producers will attempt to supply them in order to make a profit
Anything that has a price tag on it is an economic good, e.g. oil, corn, gold, trainers, watches and bicycles
Free goods are abundant in supply
Due to this abundance, it is not possible to make a profit from supplying free goods
Drinking water has been a free good for thousands of years, but as the population increases and water sources become more polluted, it has become an economic good
E.g. Sunlight, the air we breathe, sea water
Examiner Tip
In Paper 1, MCQ will explore your understanding of a free good. Often, you will be presented with a list of goods which have been given to you or provided to you by the government, free of charge (e.g. government education that you do not pay for). Remember to differentiate between something you have received freely - and something that is abundant in supply. Then it is easy to determine the answer
Last updated:
You've read 0 of your 10 free revision notes
Unlock more, it's free!
Did this page help you?