CCEA GCSE Economics

## The basic economic problem People want more than can ever be produced. Wants are unlimited: as soon as one is met, another appears, and a person who has a phone wants a better one, a holiday or a car. The resources used to satisfy wants are limited. There is only so much land, so many workers, so much machinery and so much entrepreneurial effort in any country at a given time. The gap between unlimited wants and limited resources is the **basic economic problem**. Another word for the limited supply of resources is **scarcity**. Because not everything can be produced, choices have to be made, and this is true for an individual deciding how to spend a weekly allowance, for a firm deciding what to make, and for a government deciding where to spend tax revenue. Needs and wants are not the same. A need is something a person must have to survive, such as food, water, shelter and clothing. A want is anything beyond that which a person would like to have. In practice the line moves: a phone may be a want for one person and close to a need for another who uses it for work. ## Opportunity cost Every choice means that something else is given up. The **opportunity cost** of a decision is the value of the next best alternative that is not chosen. It is not the total of everything given up, only the best option left behind. A student with a free Saturday who chooses to work for six hours at £9 an hour has given up the football match they would otherwise have gone to. If the match was…