1. The basic economic problem
- Syllabus
- 0455–2027–2028
- Section
- 1
- Level
- —
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In this section
Topic 1.1
1.1. The nature of the basic economic problem
Objectives in this topic
1.1.1—Finite resources and infinite wants
- definition of the basic economic problem
- the concept of scarcity
- examples of the basic economic problem in the context of:
- consumers
- workers
- producers/firms
- governments
1.1.2—Resource allocation decisions
- The three basic economic questions which determine resource allocation:
- what to produce
- how to produce
- who to produce for
1.1.3—Economic goods and free goods
- the difference between economic goods and free goods
Topic 1.2
1.2. Factors of production
Objectives in this topic
1.2.1—Factors of production and their rewards
- definitions of factors of production: land, labour, capital and enterprise
- rewards to factors of production: rent, wages, interest and profit
1.2.2—Quantity and quality of factors of production
- causes of changes in the quantity and quality of factors of production
Topic 1.3
1.3. Opportunity cost
Objectives in this topic
1.3.1—Opportunity cost
- definition of opportunity cost
- examples of opportunity cost in different contexts
1.3.2—The influence of opportunity cost on decision-making
- decisions made by consumers, workers, producers/firms and governments when allocating their resources
Topic 1.4
1.4. Production possibility curve (PPC) diagrams
Objectives in this topic
1.4.1—Production possibility curves (PPC)
- definition
- drawing and interpretation of the PPC diagram
1.4.2—Points under, on and beyond a PPC
- the significance of the location of different production points
1.4.3—Movements along a PPC
- the significance of movements along a PPC and opportunity cost
1.4.4—Shifts of a PPC
- causes and consequences of shifts of a PPC in terms of an economy’s growth