IGCSE Economics Notes The Basic Economic Problem

IGCSE Economics Summary Notes Basic Economic Problem

The Economic Problem: The economic problem arises due to scarcity, where the available resources are limited, but human wants are infinite.
Scarcity and Choice: The fundamental issue is scarcity, which forces economies to make choices regarding what to produce, how to produce, and for whom to produce.

Economic Goods vs Free Goods:

Feature	Economic Good	Free Good
Production	Requires scarce resources	Produced without scarce resources
Preference	More is preferred	More is not necessarily preferred
Utility	Has utility and exchange value	Has utility but no exchange value
Creation	Created by humans	Created by nature

Examples: A country faces the basic economic problem because it has limited resources (land, labor, capital) and cannot produce all the goods its people want. A farmer must decide between planting soybeans or groundnuts due to limited land (a scarce resource).

Understand Key Terminology: Make sure you clearly understand terms like "scarcity," "economic goods," and "free goods." Understand how they relate to each other.
Be Clear in Definitions: Define concepts clearly. When asked to "define" or "explain," provide a precise definition and explain the implications.
Provide Examples: Use real-world examples to support your answers. It helps demonstrate your understanding and adds context to your explanation.
Use Logical Structure for Explanations: For application-based questions, break your answer into logical steps. State the concept, explain the relationship between terms, and provide examples.
Link Concepts Together: Be prepared to connect concepts like scarcity and choice. Show how they are interrelated in different scenarios.