Notes

Explain the economic problem of scarcity? [3 marks]

The economic problem of scarcity can be defined as us as humans having unlimited wants and not enough resources (finite number of resources) to satisfy those unlimited wants, resources are scarce and there isn’t enough resources to satisfy everyone’s wants. Choices have to be made and the cost of not selecting an alternative is the opportunity cost (the cost of not selecting the alternative.

Define the concept of opportunity cost [3 marks]

Opportunity cost is the cost of not selecting the alternative, it is the alternative forgone. An example of this would be a choice between you buying a tablet or a phone. If you pick the phone the tablet is the opportunity cost which is the cost of not selecting it as your desired means of technology.

Distinguish using examples the different factors of production [6 marker]

The 4 factors of production consist of LAND, LABOUR, CAPITAL and ENTERPRISE. Land can be defined as the natural resources available for production use (examples of land include: coal, oil, gas, the sea, land itself, forests etc.) Labour can be defined as any human effort which is available for production/distribution of goods (known as human capital). (examples of labour include factory workers, employees etc.) Capital can be defined as a man made good which is used to aid in the production of goods (examples of capital include machinery, tools etc.) Enterprise can be defined as the role of entrepreneur in terms of managing the other factors of production while taking certain risks while doing so.

Discuss whether a country should conserve its natural resources or use its natural resources [8 marker]

There are certain pros and cons for conserving or using natural resources. If a country chooses to conserve its natural resources the resources will last longer and there wouldn’t be a rapid depletion of resources as they are being conserved. Another positive of conserving natural resources is that it is a more sustainable option, because the resources are being preserved for generations ahead as well as a better longer term alternative. However, there are certain pros for not conserving natural resources and using them instead would be that there will be more of an output for resources and would create more jobs for people to work in that sector (employment opportunity) but there are cons to this such as resources will deplete faster and there might be a shortage of resources in the future and it doesn’t account for longer term benefits (only for short term use).

Explain using examples what is meant by the factor of production called land [3 marker]

Land is the term used to describe the natural resources available for production use. Examples of land include coal, oil and gas as well as land itself, sea, fish, forests. Many of these examples contain useful resources like wood which can be used in the production and consumption of goods by the consumer.

Describe the nature of the economic problem [4 marker]

The nature of the economic problem can be described as having scarcity of resources as people have unlimited (infinite number) of wants however there are only a finite (limited) number of resources available for consumption. This leads to an opportunity cost which is the cost of not selecting the alternative (where you have to pick between a choice and the choice you lose is the opportunity cost). This also leads to the decision of untilizing the resources in the most optimal manner possible in order to satisfy as many people’s wants as possible.