EJC H2Econs Topic1

1 © Eunoia Junior College Economics Department 2025 Topic 1: The Central Economic Problem Theme 1.1 Scarcity as the Central Economic Problem How to use this set of lecture notes? 1) BEFORE LECTURES – UNDERSTANDING CONTENT - Reference your notes against your H2 syllabus. Mark out the key concepts so that you know what you MUST know - Read your notes ahead so that you can focus on listening and capturing additional notes during lectures 2) DURING LECTURES – APPLYING CONTENT - Bring your hard copy notes along, and use your PLDs to refer to the lecture slides concurrently - Capture additional notes, especially the real world examples where you can note down how concepts are applied and how economic analysis are developed in varying contexts - You should make use of a notet aking/consolidation tool to take notes during lessons and to consolidate your learning at timely junctures. Examples are MIRO, Notion, Goodnotes, Notability, Microsoft Onenote, KAMI, and etc. The choice is yours! 3) AFTER LECTURES – TUTORIAL PREPARATION TO USE CONTENT FLEXIBLY TO SHOW APPLICATION, ANALYSIS AND EVALUATION SKILLS - Revise concepts relevant for the case study and essay questions - Refer to the notes and use it flexibly to prepare your answers to meet question requirements. Pure memorisation will not work as it does not involve deep understanding. - Do share your notes with your friends to multiply learning!

2 © Eunoia Junior College Economics Department 2025 Essential Questions: 1. Why do consumers, producers and government make choices on the goods and services consumed and produced? 2. How do consumers, producers and governments make choices about the use of limited resources? 3. How does the free market allocate and distribute the use of limited resources? 4. Why are some outcomes of choices not efficient? Economics as a discipline to understand the human experience 1. Scarcity as the Central Economic Problem 1.1 Unlimited wants and limited resources 1.2 1.3 1.4 Scarcity, Choice and Opportunity Cost The Production Possibility Curve (PPC) Illustrating economic growth on the PPC 2. Decision-Making at the Heart of Economics 2.1 An approach for decision making 2.2 6-step decision-making template Consolidation/Summary Annex CONTENTS

3 © Eunoia Junior College Economics Department 2025 Economics as a discipline to understand the human experience The Sciences and Mathematics provide the tools to understand the natural world. Similarly, Economics provides the tools to understand the human world. The human world is related to how we make decisions, how we live, how we produce and distribute things, why and how we interact with each other. These questions have a very tangible impact on our lives, and we can utilise the tools of Economics just as how we use scientific tools to influence our lives. If you have ever wondered why the price of a ticket to your favourite band’s concert was so expensive; why you were paid so little in your part-time job; why your movie ticket is more expensive over the weekends; or why some firms make more profits than others, then studying Economics will certainly be of relevance to you! In fact, you are already an important part of the economic system. You are a consumer of goods and services, influencing its demand. Your parents are also likely to be employed, involved in the production of goods and services. They are also paying taxes that are used by the government to finance the provision of public infrastructure and subsidised education. We are all practitioners of Economics, consciously or subconsciously. We make decisions to make the best use of what we have. On a larger scale, governments make decisions to optimise the use of limited resources to achieve its set goals. Economists call this the problem of scarcity. At the heart of Economics is human behaviour: what influences it and what happens when it changes. What makes people choose one course of action over another? If we want to change behaviour, what is the best way of doing this? For example, if we want people to be more environmentally friendly, is this best achieved by taxing environmentally unfriendly behaviour, or by subsidising ‘good behaviour’? Economics affects a country’s standard of living and how people live. The tax and benefits system will affect your incentive to work, your willingness to marry, to have children and your ability to save money. An understanding of Economics therefore provides an insight into the factors that shape society. Microeconomics can be defined as the study of economic behaviour of individual economic agents (i.e., consumers, producers and governments) in making decisions regarding the allocation of limited resources, as well as their relationships in determining the pattern of production and consumption of goods and services. Macroeconomics can be defined as the study of the economy as a whole . It examines the behaviour of the entire economy by looking at the aggregate impact of the collective decisions of households, firms and governments. This domain also examines the relationships across countries that determine the pattern of production and consumption of goods and services. Naturally, these two domains are interdependent: changes in the macroeconomy will trickle down to individual economic agents, while changes in individual behaviour could be aggregated to cause a discernible impact at the national level.

4 © Eunoia Junior College Economics Department 2025 1. Scarcity as the Central Economic Problem We live on an earth that is endowed with a variety of natural resources. Some countries are endowed with more resources than others – think China compared to Singapore. Nonetheless, all countries face the problem of scarcity. Scarcity refers to a situation where limited resources are insufficient to fulfil the unlimited wants and needs of society. 1.1 Unlimited wants and limited resources Unlimited wants We have an insatiable desire to consume a wish list of goods and services – the latest smartphone, running shoes, gourmet food, luxury items, basic necessities such as houses, education services, healthcare facilities and the list goes on. Collectively, this is reflected in a country’s desire to consume a plethora of goods and services. Limited resources The means of fulfilling human wants are however limited. To produce goods and services, these resources [also known as factors of production (FOPs)] are typically required: a. Land – largely referring to natural resources available, including land, minerals and raw materials. b. Labour – refers to the mental and physical effort of workers measured in terms of man-hours. Apart from the quantity of labour which is largely determined by the population size, countries often look at improving the quality (skills and abilities) of labour by national upskilling efforts. c. Capital – also known as capital goods (a.k.a. investment goods) are manufactured resources used to produce goods and services. Examples include tools, equipment, machinery, office buildings and intermediate goods and services that require further processing to make final goods and services. d. Entrepreneurship – the factor of production that takes overall responsibility for the decision-making process to combine the other three resources for meaningful production of goods and services. The entrepreneur is key as without him, the other resources remain idle. He also takes on the risks involved in the production process. FOPs have alternative uses. For example, labour could be deployed to manufacturing or agricultural sectors while a plot of land could be used for tourism or medical services. Connect, Extend, Challenge Since China enjoys an abundance of