The Basic Economic Problem | A-Level Economics Notes
These revision notes cover everything you need to know about The Basic Economic Problem for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What is the basic economic problem?
The basic economic problem is scarcity. There are limited resources, unlimited wants.
What is opportunity cost?
Opportunity cost is the value of the next best alternative that was foregone.
What is the main purpose of economic activity?
The main purpose of economic activity is to produce goods and services to satisfy needs and wants.
What are the key economic decisions?
AQA only
The key economic decisions are:
- what goods and services to produce
- how to produce these goods and services
- who is to benefit from these goods and services
What is a positive statement?
A positive statement is a statement that can be tested. It may or may not be correct, but it can be clearly tested using facts or data.
What is a normative statement?
A normative statement is a statement that includes a value judgement and cannot be tested using facts or data.
How do economists make decisions?
Governments and people often rely on value judgements initially to decide when to get involved in economic analysis.
Value judgements are views about what is morally right or wrong.
Economic analysis then focuses more on positive statements and testing theories against the data.
Summary questions
- What is the basic economic problem?
- What is opportunity cost?
- What is the main purpose of economic activity?
- What are the key economic decisions?
- What is a positive statement?
- What is a normative statement?
- How do economists make decisions?
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