HCI H2 Economics Lecture Notes 1 Central Problem of Economics

HWA CHONG INSTITUTION Year One H2 Economics 2022 Chapter #1: Microeconomics I – Introduction & Central Problem of Economics  Hwa Chong Institution Economics Unit. All Rights Reserved. 1.2.1 Introduction to Economics & Central Problem of Economics ` Name: ____________________ CT: 22______

HWA CHONG INSTITUTION Year One H2 Economics 2022 Chapter #1: Microeconomics I – Introduction & Central Problem of Economics  Hwa Chong Institution Economics Unit. All Rights Reserved. 1.2.2 Learning Outcomes Syllabus content 1.1 Scarcity and the Central Economic Problem 1.1.1 Scarcity, choice and resource allocation a. Concept of scarcity and the inevitability of choices by economic agents (consumers, producers and governments) b. Concept of opportunity cost and the nature of trade-offs in the allocation of resources 1.1.2 Rationale decision-making process by economic agents a. Understanding objectives of economic agents  Consumers – maximisation of utility  Producers – maximization of profits  Governments – maximization of social welfare b. Recognising constraints c. Gathering information and considering perspectives d. Weighing costs and benefits in decision-making* e. Recognising trade-offs f. Recognising intended and unintended consequences Note: *A marginalist approach to weighing costs and benefits is the expected approach. Cost-benefit analysis (CBA) is not required.

HWA CHONG INSTITUTION Year One H2 Economics 2022 Chapter #1: Microeconomics I – Introduction & Central Problem of Economics  Hwa Chong Institution Economics Unit. All Rights Reserved. 1.2.3 A LEVEL QUESTIONS IN RECENT YEARS TYS 2021 Q1 The market for bicycles is often said to generate external benefits such as reduced traffic congestion and reduced air pollution. (a) Explain how economic theory suggests consumers act rationally to decide whether or not to buy a bicycle, and how producers of bicycles act rationally to determine their level of output. [10] (b) Discuss how government intervention in the market for bicycles could be used to maximise social welfare and consider how likely it is that such intervention will be successful in achieving this aim. [15] TYS 2018 Q3 The proposed Cross Island MRT line would run through the Central Catchment Nature Reserve. An alternative route going round the reserve’s southern edge would preserve Singapore’s natural heritage and serve a much larger number of residents. The Land Transport Authority, LTA, says CHAPTER OUTLINE 1.1 INTRODUCTION TO ECONOMICS 1.1.1 What is Economics? 1.1.2 Why study Economics? 1.1.3 Approach to studying Economics 1.1.4 Scope of Economics 1.2 CENTRAL PROBLEM OF ECONOMICS 1.2.1 Scarcity, Choice & Opportunity Cost  Scarcity  Choice  Opportunity Cost  Law of Increasing Opportunity Cost 1.2.2 The Production Possibility Curve (PPC)