1.1.1 The economic problem

The problem of scarcity – where there are unlimited wants and finite resources, leading to the need to make choices.

Opportunity cost and its effect on economic agents (consumers, producers and government).

The use of diagrams to show production possibility curve.

Production possibility curve diagram should be used to show:

• the maximum productive potential of an economy
• fully employed or unemployed resources
• opportunity cost
• positive or negative economic growth that shifts the production possibility frontier (PPF) outwards and inwards
• possible and unobtainable production.

Possible causes of positive or negative economic growth.