1 Basic economic problem: choice and the allocation of resources • economic

problem • factors of production • opportunity cost • resource allocation • choice

• production possibility curves
Task – you are going to draw and briefly explain these points:
A. economic problem
B. factors of production
C. opportunity cost
D. resource allocation
E. choice (some wants must be given up so that other wants can be achieved)
F. production possibility curves
Grading out of 10; drawing (4), explanation (4), neatness and grammar (2).
A Draw and explain the economic problem

Bank

Last oil left!

Gas station Only $99 per
liter

Scarcity is the basic economic problem, it is the gap between limited (scarce, few,
not much) resources and theoretically limitless wants (I want a car, a boat, a
house, a gold phone… I want… I want… I want!).
Therefore, because people want so much decisions about how to allocate
resources efficiently; to satisfy basic needs and as many additional wants at
possible choices must be made by producers making (supplying) things and
consumers demanding (needing and wanting) things.
In summary scarcity is a compromise, to get one resource (fuel or gas) you must
usually give up another resource (money).
B Draw and explain the factors of production

I have idea for a

better business

Labour

Enterprise
Capital

Land

The factors of production is a standard economic term that describes the inputs
(things going in to a work process) that are used in the production
(making/producing/manufacturing) of goods or services in order to make a profit
include land (natural resources), labour (workers time), capital (money invested in
things to help get the business going) and enterprise (the idea for a business or
entrepreneurship).
C Draw the opportunity cost using buying a basketball and football as an
example
The opportunity cost is the cost of choosing between alternative uses or
resources. It is the lost benefit you could have received which is the Next Best
Alternative. For example you have $1 and can buy a $1 football or $1 basketball,
if you chose the football then the basketball is the NBA.

NBA

The Next Best Alternative of a

$1 football is the $1 basketball
not bought or foregone.

D Draw the resource allocation using manufacturing cups and mugs as an

example

This is a different type of opportunity cost. It is a ‘trade off’. For example you
make cups and mugs (costing $1 each to make) and with resource allocation you
can allocate a resource of $9 to produce (make) 4 cups and 5 mugs or say 3 cups
and 6 mugs. Every time you decide how allocate your scare resource of $9 you
must decide to make more or less of another.
E Draw the choice
Choice always involves a cost of something. The cost can be money or time.
Every choice requires that some wants must be given up so that other wants can
be achieved.
I need to choose
what to do now

Read Economics books

Write Economics essays

Draw Economics posters Sing about Economics

Watch Economics
videos
Dance about Economics

Present Economics All these choices are good but I need to

use my time wisely and choose one of
two of them and trade-off against the
other options/choices.
F Draw the production possibility curves (PPC)

Balls PPC
Basketballs

Balls can produce a maximum of

70
70 basketballs a week and
50 footballs a week 60

50 60
Footballs

Draw on the graph if Balls decides to produce 60 footballs in one

week. What is the opportunity cost of this decision? And briefly explain what a
PPC shows.
60 footballs means probably making 60 basketballs so the opportunity cost of 60
footballs is 10 basketballs foregone.

The PPC shows the opportunity cost and choice of different production decision
and the trade-off caused by choosing a particular course of action (production
decision).
Extra Draw these goods and services that satisfy the needs and wants of
consumers
A non-durable consumer good

Drawings of Food, drink, soap

A durable consumer good Consumer services

Drawings of Car, washing machine Drawings of Cafes and holidays

Capital goods

Drawings of Factories, shops, offices

Semi-finished goods Business services

Drawings of Paper for books, circuits for Drawings of Banking, transportation,

computers, screens for phones advertising