The Basic Economic Problem: Scarcity, Choice and Opportunity Cost

AQA

GCSE

The fundamental economic problem arises from the conflict between infinite human wants and finite resources (land, labour, capital, enterprise). This necessitates choices regarding resource allocation—specifically what to produce, how to produce it, and for whom. Analysis must focus on the mechanism of choice, the resulting opportunity cost for economic agents (consumers, firms, governments), and the representation of these trade-offs via Production Possibility Frontiers (PPFs).

Objectives

Exam Tips

Pitfalls

Key Terms

Mark Points

What You Need to Demonstrate

Key skills and knowledge for this topic

Award marks for explicit definition of the 'Basic Economic Problem' as infinite wants exceeding finite resources, avoiding colloquial phrasing like 'not enough money'.
Credit accurate identification of the 'next best alternative forgone' when defining or applying opportunity cost.
Responses must distinguish between the four factors of production (Land, Labour, Capital, Enterprise) and their specific rewards (Rent, Wages, Interest, Profit).
Award analysis marks for chains of reasoning that link resource scarcity to the necessity of rationing systems (price mechanism vs government allocation).

Marking Points

Key points examiners look for in your answers

Award marks for explicit definition of the 'Basic Economic Problem' as infinite wants exceeding finite resources, avoiding colloquial phrasing like 'not enough money'.
Credit accurate identification of the 'next best alternative forgone' when defining or applying opportunity cost.
Responses must distinguish between the four factors of production (Land, Labour, Capital, Enterprise) and their specific rewards (Rent, Wages, Interest, Profit).
Award analysis marks for chains of reasoning that link resource scarcity to the necessity of rationing systems (price mechanism vs government allocation).

Examiner Tips

Expert advice for maximising your marks

💡When defining opportunity cost, explicitly name the alternative being rejected in the specific context provided (e.g., 'building a school instead of a hospital').
💡Use the 'Chain of Reasoning' technique (Connective -> Impact -> Consequence) for 9-mark and 15-mark analysis questions.
💡In 'Evaluate' questions, ensure the conclusion offers a justified judgement based on the weight of prior arguments, not just a summary.
💡Allocate 1 minute per mark strictly; spend maximum 20 minutes on the final 15-mark case study question.

Common Mistakes

Pitfalls to avoid in your exam answers

Defining opportunity cost generically as 'what is given up' rather than the specific 'next best alternative'.
Confusing 'Capital' as a factor of production (machinery/infrastructure) with financial capital (money/investment).
Asserting that the basic economic problem can be solved by printing money or increasing efficiency, ignoring the absolute limit of finite resources.

Key Terminology

Essential terms to know

Likely Command Words

How questions on this topic are typically asked

Define

Calculate

Explain

Analyse

Discuss

Evaluate

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