This unit introduces the foundation of economics: how scarce resources force societies to make choices, measure trade-offs, and organize production and distribution.
What you will learn
- 1.1 Concepts of Scarcity and Choice — why wants exceed means, and how choice arises.
- 1.2 Concept of Opportunity Cost — the value of the next-best alternative forgone.
- 1.3 Production Possibility Curve (PPC) — attainable combinations, shape of the curve, and shifts when resources or technology change.
- 1.4 Concept of Allocation of Resources — what, how and for whom to produce; full utilization and growth of resources.
- 1.5 Division of Labor and Specialization — splitting work, types of division of labour, and gains and costs of specializing.
- 1.6 Economic System — market (capitalist), command (socialist), and mixed systems with their features.
Unit overview
Scarcity means resources are limited relative to unlimited human wants. Because of scarcity, every society must choose among competing uses of land, labour, capital and entrepreneurship.
Opportunity cost is the cost of that choice: the benefit of the best option you did not take. The production possibility curve (PPC) shows combinations of two goods an economy can produce with full use of resources and given technology; points inside the curve mean idle resources, and outward shifts show growth.
Allocation of resources answers three basic questions — what to produce, how to produce, and for whom — and aims at efficient (full) use and long-run growth of productive capacity.
Division of labour and specialization raise productivity by focusing workers and firms on narrow tasks, with important advantages and disadvantages. Finally, societies organize these decisions through an economic system: market, command, or mixed.
Open each sub-topic below for full notes, diagrams and examples.