The Basic

Economic Problem
Unit 1 -Lesson.2
 Zoolinomics
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Discussion Questions a
nd Answers
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your group, and compare the answers
with those that you came up with in
your discussions.
Learning Objectives
Scarcity and Choice

1. Define, explain and give examples of the

basic economic problem.
2. Identify the three main economic agents
(decision makers) in an economy;
individuals and households, firms and
the government.
3. Difference between an economic good
and a free good
 Scarcity (the basic economic
problem) and Choice
The study of economics begins with the idea that people cannot have
everything they want and need.
Discuss! What is the difference between a want and a need?

Economics is the study of how people seek to satisfy their unlimited needs
and wants by making choices. Choices must be made by individuals,
groups, businesses, and governments. Why?
Needs & Wants - Jamboard - 3 mins

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of a Need and a Want
Scarcity

Watch this video and think

about the concept of scarcity.

Whilst watching the video:

Think! Why can’t we all live
in a mansion and have 3 cars?
Toilet break - 5 mins
Scarcity

Scarcity exists because there are limited amounts of resources available to

produce the unlimited quantities of goods and services wanted by people.
Goods Services
1. 1.
Complete this
2. 2. table on P10 of
3. 3. your Unit 1
4. 4. workbooks

5. 5.
Shortage vs. Scarcity

What is the difference between a shortage and scarcity?

Discuss in your table groups. Be prepared to explain your conclusion and to
provide an example to support your explanation.
 Shortage & Scarcity - Terms

Scarcity: Limitation of productive resources like land,

labour, capital and entrepreneurship (we will go into
this in coming lessons)

Shortage: When quantity supplied of a good is smaller

than the quantity demanded in the market. (The difference
between the two is the shortage)
 Free Goods
Free Good: Infinitely abundant resources
It can be consumed in as much quantity as needed without reducing its availability to others

Discuss! Can you provide 2 examples of a free good? 2 mins

Tip: This is not

referring to an item
you receive for free!
 Basic Economic Problem
The basic economic problem: resources are finite/scarce
but needs and wants are infinite

Unlimited wants and needs Scarce Resources

Basic economic problem

 The Basic Economic Problem
Unlimited Wants
Choices have to be
Limited or Finite
made about how to
allocate resources Resources

Resources are Factors of Production

● Land: Natural resources
● Labour: Human resource
● Entrepreneurship: Skills/human resource
● Capital: Man-made resource (fixed capital / working capital)

Choices about how to allocate resources create an opportunity cost

and so, decisions must be made about:
What to produce?
How to produce?
For whom to produce?