<1.1 THE NATURE OF THE ECONOMIC PROBLEM>  

• First things first, we can all agree that our WANTS ARE UNLIMITED, you may tell yourself otherwise but the fact that you have 5 old phones at home and 200 pairs of trainers tells another story ;)

• Now how is this related to economics you may ask? Well economics only exists because the wants of society are never-ending, and clearly, SOME PEOPLE'S WANTS ARE MORE ABLE TO BE SATISFIED THAN OTHERS, but WHY CAN'T ALL WANTS BE SATISFIED?

• ...the answer to this question is related to the fact that most of these UNLIMITED WANTS require PRODUCTIVE RESOURCES to be used, however, these RESOURCES ARE LIMITED.

• With UNLIMITED WANTS + LIMITED PRODUCTIVE RESOURCES, we have a situation called 'SCARCITY'.

• As such we can say that due to scarcity, CHOICES about how these limited resources are used ('ALLOCATED') must inevitably be made.

• Thus every economy must find ways to answer THREE ECONOMIC QUESTIONS.

Q. Are people willing to pay for it? YES!

Q. Is there sufficient quantity to satisfy all demand at zero dollars? NO!

Q. Does its use create an opportunity cost? YES!

Q. Does it use scarce resources to make? YES!

EXAMPLES: 

• I-PHONE

• COCA-COLA

• OFS

Q. Are people willing to pay for it? NO!

Q. Is there sufficient quantity to satisfy all demand at zero dollars? YES!

Q. Does its use create an opportunity cost? NO!

Q. Does it use scarce resources to make? NO!

EXAMPLES: 

• AIR IN THE SKY

• SEAWATER

• SAND IN THE SAHARA

• Define ‘resources’. (2)

• Why can the economic problem never be solved? (2)

• What is meant by ‘scarce resources’? (2)

• Define resources. (2)

• Explain why the economic problem can never be solved.  (4)