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.
The exam often tests opportunity cost by applying it to a specific economic agent. The structure is always the same.
Consumers have a limited income. Spending on one good means giving up the next best alternative use of the same money.
Producers have limited inputs (workers, machines, raw materials, factory space). Using them to make product A means they cannot make the next best alternative product B.
Workers have limited time and limited skills. Taking job A means giving up the next best alternative use of that time.
A government has a limited tax revenue. Spending on one programme means giving up the next best alternative use of those tax pounds.
Identifying opportunity cost for a specific agent (2-mark questions)
What comes up: Questions ask you to identify (one mark each) the opportunity cost of two different agents in the same scenario — for example, the opportunity cost of households spending their income, and the opportunity cost of firms exporting their products.
Write (two marks): (1) Name the specific alternative use of the resource that is sacrificed — for a household, this is saving (the income could have been saved rather than spent); for a firm exporting, this is selling the same goods in the home market. (2) Each answer must be a specific alternative, not a vague description.
Watch out: A general phrase like "something else" or "other goods" will not earn the mark. The mark scheme requires the specific next-best alternative in the context of the question. For government spending, name a specific alternative programme (for example healthcare instead of education).