NJC 2025 SH1 H1 H2 Econ Ch1 Seminar Notes (Final)

CHAPTER 1 The Central Economic Problem 1 SCARCITY, CHOICE & OPPORTUNITY COST 1 1.1 WHAT IS ECONOMICS 1 1.1.1 WHAT ARE RESOURCES 1 1.1.2 POSITIVE AND NORMATIVE ECONOMICS 3 1.2 THE TWO MAIN BRANCHES OF ECONOMICS 3 1.3 SCARCITY, CHOICE AND RESOURCE ALLOCATION 4 2. RATIONAL DECISION-MAKING 6 2.1 HOW RATIONAL DECISION-MAKING IS USED 6 2.1.1 RATIONAL DECISION-MAKING AS AN OPTIMISATION PROBLEM 6 2.1.2 DECISION-MAKING FRAMEWORK 7 2.1.3 RATIONAL DECISION-MAKING AND THE MARGINALIST PRINCIPLE – WEIGHING COSTS AND BENEFITS 8 2.2 CONCEPTS OF EFFICIENCY 10 2.3 THE PRODUCTION POSSIBILITY CURVE 12 2.3.1 WHAT DOES THE PPC ILLUSTRATE? 13 2.3.2 THE CONCEPT OF INCREASING OPPORTUNITY COST 15 2.3.3 ECONOMIC GROWTH AND SHIFTS OF THE PPC 16 3. CONCLUSION 19 4. DECISION-MAKING EXAMPLE 20 5. APPENDIX: HOW DIFFERENT TYPES OF MARKET ALLOCATE RESOURCES 23

2025 SH1 H1 / H2 Economics Chapter 1 National Junior College H1 / H2 Economics - 8843 / 9570 1 1. SCARCITY, CHOICE & OPPORTUNITY COST 1.1 WHAT IS ECONOMICS Economics is a social science that studies the allocation of scarce resources to the production of goods and services used to satisfy consumers ’ unlimited wants. ✴ Wants refer to all goods and services people would consume if they had unlimited incomes. ✴ Resources are inputs used to produce goods and services. Wants of people are unlimited. The resources used to satisfy these wants are, on the other hand, limited. Economists study how people make use of the scarce resources to satisfy their wants. They study how individuals and society maximise their level of satisfaction, given the problem of scarcity. 1.1.1 WHAT ARE RESOURCES? Resources (Factors of Production) Resources or factors of production can be divided into four broad categories: land, labour, capital and entrepreneurship. Learning Objectives Explain the problem of limited resources and unlimited wants Identify and provide examples for the factors of production Distinguish between the term financial capital and physical capital Explain the concept of opportunity costs and trade-offs DEFINITION: Scarcity is the problem arising from limited resources and unlimited wants. That is, it is the excess of human wants over what can actually be produced with limited resources to fulfill these wants.

2025 SH1 H1 / H2 Economics Chapter 1 National Junior College H1 / H2 Economics - 8843 / 9570 2 Land This includes all those productive resources supplied by nature. This means that it includes not only land in the conventional sense in terms of plots of land but all those resources freely supplied by nature such as rivers, trees and minerals. Land resources can be renewable e.g. forests or non - renewable such as oil and natural gas. Labour Labour is the human effort – both physical and mental – directed to the production of goods and services. Labour resources are often made more productive through education or training. Capital