Economics, unit 1, AQA, market failure, the economic problem, goods and services, costs, production, opportunity cost

Well explained resource for UNIT 1. If you would like me to include anything extra for this particular topic, please comment :)


Scarce resources

Opportunity costs


PPF curve

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  • Created by: Nikorasu
  • Created on: 06-02-13 17:46
Preview of Economics, unit 1, AQA, market failure, the economic problem, goods and services, costs, production, opportunity cost

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The economic problem
The purpose of economic activity and the issue of scarcity
The fundamental economic problem is that consumers (or informally us) have infinite wants in
relation to the limited resources we can use. I.e. Only a limited amount of resources are
available to produce the unlimited quantity of goods and services people desire.
The ultimate purpose, or objective, of economic activity is to increase people's happiness or
economic welfare.
An increase in production enables economic welfare to increase, as long as this increase in
production has led to an increase in consumption. (Consumers buying goods and services)
Production and consumption usually leads to resource depletion (The concept of using up
scarce resources) and resource degradation (Like pollution and destroying the
In theory ­ Consumption usually leads to an increase in economic welfare, whilst also causing
there to be higher standards of living.
Goods such as food bought for consumption are known as consumer goods
Goods such as a machine bought for a firm are known as capital goods
Utility is a word used by economists which is the welfare that people enjoy when they
An economy's Production possibility frontier (PPF)

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Trading off between these different objectives
Understandably, it is difficult to chose between different outcomes that all have advantages
and disadvantages.
It, however, may be possible to resolve the conflict by trading off between the alternatives.
(as shown in my previous diagram)
Where the production of capital goods can be traded off against the production of consumer
Free goods and economic goods
The majority of goods and services that add to our economic welfare and standard of living
are produced from scarce resources.…read more


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