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 and . 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 .
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.
Free goods vs economic goods
Distinguishing free goods from economic goods comes up in MCQs, so you need to know: a free good is so abundant it has no price and no opportunity cost (air, sunlight, wind); an economic good is scarce, so obtaining it has an opportunity cost. Abundance is the test — state-provided goods (free schooling/healthcare) are paid for through tax, so they are not free goods.