Economy

🟦 1. The Basic Economic Problem

Question focus: Explain that technology increases output but cannot remove scarcity.

Technology = improves production methods → higher efficiency.

This means more goods/services can be produced with the same resources → PPC shifts outward.

BUT scarcity is never removed because:

Wants are still unlimited.

Resources remain finite (land, time, raw materials).

Example: Even if farming tech doubles food supply, people will still want more clothes, better houses, more cars, etc.

👉 Exam key line: Technology reduces the problem of scarcity but does not eliminate it because human wants are infinite.

🟦 2. Opportunity Cost

Question focus: Define and include non-economic factors.

Definition: Opportunity cost = the next best alternative forgone when a choice is made.

Example (economic): Choosing to buy a phone instead of a bicycle → the opportunity cost is the bicycle.

Non-economic factors: Sometimes decisions are not only about money.

Interest in subject → choosing art over science even if science has higher salary.

Entertainment preference → spending money on concerts instead of books.

Peer influence → choosing what friends choose.

Long-term benefit → studying instead of gaming because future success is more valuable.

👉 Exam key line: Opportunity cost is not always financial — social and personal factors also matter.

🟦 3. Factors of Production

Question focus: Geographical mobility of labour.

Geographical mobility: the ability & willingness of labour (workers) to move from one region to another for employment.

Factors affecting mobility:

Language barriers, family ties, cost of moving, housing, government support.

Effects on the country:

Positive → reduces unemployment in one region, fills labour shortages in another, improves efficiency.

Negative → brain drain (loss of skilled workers), regional inequality.

👉 Exam key line: High mobility benefits the economy by placing workers where they are most needed.

🟦 4. PPC (Production Possibility Curve)

Question focus: Explain and draw.

Definition: PPC shows maximum possible combinations of two goods that can be produced with available resources & technology.

Represents:

Scarcity → can’t have unlimited goods.

Choice → deciding which goods to produce.

Opportunity cost → trade-offs between goods.

Efficiency → on the curve.

Shifts:

Outward = growth (new tech, resources, better education/training).

Inward = decline (natural disaster, war, loss of resources).

Diagram (to memorize for exam):

Axes: Good A (x-axis), Good B (y-axis).

Curve bowed outwards.

Inside point = inefficient.

Outside point = unattainable.