Scarcity and Opportunity Cost

    OCR
    GCSE

    The fundamental economic problem arises from the conflict between infinite human wants and finite resources (scarcity). This necessitates choice, resulting in opportunity cost—the value of the next best alternative foregone. Candidates must analyze this dynamic through the classification of factors of production (Land, Labour, Capital, Enterprise) and model these constraints using Production Possibility Frontiers (PPFs) to demonstrate productive efficiency, allocative efficiency, and potential economic growth.

    5
    Objectives
    4
    Exam Tips
    3
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    Learning Objectives

    What you need to know and understand

    • The Basic Economic Problem: Infinite wants vs. finite resources.
    • Factors of Production: Land, Labour, Capital, Enterprise.
    • Factor Rewards: Rent, Wages, Interest, Profit.
    • Definition of Opportunity Cost: The value of the next best alternative foregone.
    • Economic Agents: Consumers, Producers, Government.

    Marking Points

    Key points examiners look for in your answers

    • Award marks for the precise definition of opportunity cost as the 'next best alternative foregone', not merely 'what is given up'.
    • Credit application of the four Factors of Production (Land, Labour, Capital, Enterprise) to specific case study contexts.
    • Candidates must demonstrate logical chains of reasoning when analysing the impact of resource allocation decisions.
    • Reward responses that distinguish between financial cost and opportunity cost in decision-making scenarios.

    Examiner Tips

    Expert advice for maximising your marks

    • 💡When defining opportunity cost, the phrase 'next best alternative' is non-negotiable for full AO1 marks.
    • 💡In 6-mark analysis questions, use connectives (e.g., 'this leads to', 'consequently') to build developed chains of reasoning.
    • 💡Always refer to the specific data or text in the stimulus material to secure AO2 application marks.
    • 💡For government contexts, link opportunity cost to budget constraints and the trade-off between different public services (e.g., healthcare vs. education).

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Defining 'Capital' as money or finance rather than man-made aids to production (machinery, infrastructure).
    • Confusing 'Scarcity' (permanent limited resources) with 'Shortage' (temporary market disequilibrium).
    • Failing to identify the 'next best' alternative, instead listing multiple alternatives or general disadvantages.

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    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    State
    Explain
    Calculate
    Analyse
    Evaluate
    Discuss

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