Scarcity as the Central Economic Problem
H2 Economics - syllabus 9570, 2026
See why scarcity forces choices, measure opportunity cost, read a production possibility curve and understand how consumers, firms and governments make decisions.
- What economics studies
Economics studies how people, firms and governments make choices when resources are scarce.
- Scarcity and choice
Resources are limited but wants are not, so every society must choose what to produce, how and for whom.
- Opportunity cost
Opportunity cost is the next-best alternative given up when you make a choice.
- The production possibility curve
A PPC shows the most an economy can produce of two goods with its resources and technology.
- Opportunity cost on a PPC
Moving along a PPC shows the opportunity cost, and a bowed-out PPC shows it rising.
- Using capacity versus expanding it
Moving from inside to the PPC uses idle resources; shifting the PPC out raises capacity.
- What consumers, producers and governments want
Consumers maximise satisfaction, producers maximise profit and governments maximise social welfare.
- Thinking at the margin
Take one more step only if the extra benefit is greater than the extra cost.
- Information and constraints
Good decisions depend on what is feasible and on having reliable information.
- Intended and unintended consequences
Decisions have intended effects and unintended ones, often on people who were not part of the decision.
- Reviewing decisions
Review a decision when new information shows the outcome is different from what was expected.
- Model essay (a): scarcity, choice and opportunity cost
A top 10-mark answer, written in about 20 minutes, uses a PPC to show why scarcity forces choices, and why each choice costs the next-best alternative.
- Model essay (b): is marginal thinking enough?
A top 15-mark answer, written in about 30 minutes, shows the MB = MC rule, then tests it against constraints, imperfect information, consequences and review.
- Case study practice: homes or forest?
A whole H2 case study: 30 marks, about 75 minutes in the exam. Answer every part, then compare with the suggested answers.
What you will be able to do
I can explain that scarcity means our wants are unlimited but the resources to meet them are limited.
Syllabus 9570, 1.1.1(a). Scarcity, choice and resource allocation: The Central Economic Problem is scarcity, arising from limited resources and unlimited wants
Taught in What economics studies, Scarcity and choice
I can explain why scarcity forces people, firms and governments to choose how resources are used.
Syllabus 9570, 1.1.1(b). Scarcity, choice and resource allocation: Scarcity implies that choices have to be made in the allocation of resources between different uses
Taught in Scarcity and choice, Information and constraints, Model essay (a): scarcity, choice and opportunity cost, Case study practice: homes or forest?
I can explain the trade-off and the opportunity cost (the next best thing given up) in a choice.
Syllabus 9570, 1.1.1(c). Scarcity, choice and resource allocation: When choices are made, trade-offs and opportunity costs are incurred
Taught in Opportunity cost, Opportunity cost on a PPC, Model essay (a): scarcity, choice and opportunity cost, Case study practice: homes or forest?
I can explain scarcity, choice and opportunity cost from the view of a consumer, a producer and a government.
Syllabus 9570, 1.1.1(d). Scarcity, choice and resource allocation: The concepts of scarcity, choice and opportunity cost can be explained from the perspectives of different economic agents (consumers, producers and governments)
Taught in Opportunity cost, What consumers, producers and governments want
I can use a production possibility curve to show scarcity, opportunity cost, efficiency, unemployment and growth.
Syllabus 9570, 1.1.1(e). Scarcity, choice and resource allocation: Production Possibility Curve (PPC) can be used to illustrate scarcity, choice, opportunity cost, productive efficiency, full employment, unemployment or under-utilisation of economic resources and changes in the productive capacity of an economy
Taught in The production possibility curve, Opportunity cost on a PPC, Using capacity versus expanding it, Model essay (a): scarcity, choice and opportunity cost, Case study practice: homes or forest?
I can state what consumers, producers and governments each aim to maximise: satisfaction, profit and social welfare.
Syllabus 9570, 1.1.2(a). Decision-Making Process of Economic Agents: Objectives of rational economic agents: consumers aim to maximise utility (satisfaction), producers aim to maximise profits and governments aim to maximise social welfare
Taught in What consumers, producers and governments want, Thinking at the margin, Model essay (b): is marginal thinking enough?, Case study practice: homes or forest?
I can describe how people and firms gather information, weigh costs and benefits, and review choices and their side effects.
Syllabus 9570, 1.1.2(b). Decision-Making Process of Economic Agents: In the pursuit of their objectives, economic agents gather information, weigh benefits and costs, consider constraints and perspectives before making decisions. They take into account the intended and unintended consequences, and any changes occurring, before reviewing the decisions
Taught in Thinking at the margin, Information and constraints, Intended and unintended consequences, Reviewing decisions, Model essay (b): is marginal thinking enough?, Case study practice: homes or forest?
Original teaching notes