Introduction to Economics and Basic Concepts
The domain Introduction to Economics and Basic Concepts tests whether you can define scarcity, choice and opportunity cost, separate microeconomics from macroeconomics, and read a production possibility curve (PPC) correctly. Board papers usually pair a definition with a one-mark numerical or a reasoning question on a diagram.
Core rules
- Scarcity is the root problem: resources are limited, wants are unlimited, so every choice has a cost.
- Opportunity cost is the value of the next best alternative foregone, not the money paid.
- The three central problems of every economy: what to produce, how to produce, and for whom to produce.
- The PPC shows combinations of two goods produced with full and efficient use of given resources and technology. It is concave to the origin because marginal opportunity cost rises.
- Points inside the curve mean underutilisation; outside means unattainable; a rightward shift means more resources or better technology, while a movement along the curve is only reallocation.
Worked example
An economy moves from 0 wheat and 100 cloth to 10 wheat and 90 cloth, then to 20 wheat and 70 cloth. First move: 10 cloth sacrificed for 10 wheat, i.e. 1 cloth per unit of wheat. Second move: 20 cloth for 10 wheat, i.e. 2 cloth per unit. Opportunity cost is rising, which is exactly why the PPC is concave.
Traps that cost marks
- Writing that opportunity cost equals price; it is the alternative given up.
- Confusing a shift of the PPC (resources or technology change) with a movement along it (reallocation only).
- Calling a statement positive when it contains ought or should; that is normative.