CAIE IGCSE Economics 1.1 The Nature of the Basic Economic Problem Questions

Practise the basic economic problem by linking scarce resources to choices, allocation questions, and economic versus free goods.

Exam points

define scarcity as finite resources against unlimited wants in consumer or government contexts
distinguish what, how and for whom decisions from non-allocation choices
compare economic and free goods using scarcity, resources and opportunity cost

Covered syllabus points

1.1.1—Finite resources and infinite wants 1.1.2—Resource allocation decisions 1.1.3—Economic goods and free goods

[Maximum number: 1]

A government wants to build a new hospital.
What is most likely to prevent the government from doing this?

People in the country cannot afford healthcare.

People in the country would go abroad for healthcare.

The government cannot agree how big the hospital should be.

The government does not have enough money.

[Maximum number: 1]

There are three key questions to be decided in determining resource allocation within an economy.
What does not relate to one of the choices in the three key questions?

whether all income groups receive the output

whether consumer or industrial goods are produced

whether economic goods or free goods are supplied

whether labour or capital is used in production

[Maximum number: 2]

South Korea makes use of both economic goods and free goods. Its output includes products with both elastic and inelastic supply. The country is building the world's first floating city, estimated to cost $\$ 180 \mathrm{~m}$ . This is to cope with rising sea levels caused by climate change. Governments take a number of measures to reduce greenhouse gases which contribute to climate change, including banning the burning of wood to heat homes.

Identify a difference between economic goods and free goods.

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Covered syllabus points

Question 1

Question 2

Question 3