Basic Economic Problem · 3 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 14% of your exam marks.
Opportunity cost and scarcity definitions appear on nearly every paper; consistently 4 to 6 marks in Q1 Part A context questions.
A useful follow-up to scarcity is the distinction between economic goods and free goods. This often appears in Paper 1 MCQs.
An economic good is a good that is scarce in relation to demand, so a sacrifice has to be made to obtain it. Economic goods have a price and an opportunity cost.
Anything with a price tag is an economic good. Oil, smartphones, university courses, bottled water, gold, a haircut, a streaming subscription. Producers supply these in order to make a profit.
A free good is a good that is so abundant in supply that no sacrifice is needed to obtain it. Free goods have no price and no opportunity cost.
Classic examples: sunlight, the air we breathe in most places, sea water.
A good can move from being a free good to being an economic good if its supply becomes limited relative to demand. Clean drinking water was a free good for most of human history; today, with rising population and pollution, bottled drinking water in many places has a price and is therefore an economic good.
A common trap in MCQs: "free" can mean "given to me at no cost" (e.g. state-provided education) without being a free good. A good is "free" in the economic sense only if it is abundant, not just paid for by someone else.