welcome to this video in today's video we have started a new series for the igcs economics syllabus and um the content is the same but rather I was not liking the way I structured the videos previously so now this is a more newer type of video and I'll be covering um all the topics and all the chapters that you need to know so there will be uh six videos covering all the six chapters and then after that I will be doing PA paper videos for all the chapters or we'll see how that works maybe all together and um we'll see how that goes so this is the first video This is the first chapter the first chapter is the basic economic problem on your screen you can see this is the syllabus and this is what we're going to be covering in today's video so we'll be having a look at the uh first of all what is economics then we'll have a look at you know defining this economic problem looking at economic Goods free Goods um looking at the factors of production looking at opportunity cost and then looking at finally the PPC curve so this is the smallest chapter out of all the six and this is sort of the introductory to economics okay now this video is for all those who are doing the IGCSE 0455 um syllabus for 2023 onwards 2024 onwards right um and there was not a big change from my old videos but rather as I said it's more of the structuring and I wanted to just change uh here um you know just improve the video quality and improve the recording as of a whole okay so without wasting any of your time and um you know we're just going to go straight into the the the the the content and uh let's actually begin okay so let's start off with asking ourselves first of all what is economics okay when when we when we study economics what is the first thing that comes into your mind okay so if I just if I just paste this right here and and just say what exactly is this subject all about okay and in fact that is the first chapter that is what the first chapter talks about now according to uh Wikipedia economics is the social science that describes the factors that determine the production distribution and consumptions of goods and services let me just actually put that um up for you right here um and this is the actual definition according to Wikipedia so it says that economics is a social science right it's a social science that describes the factors that determine the production now later on you'll you you'll learn that we have four factors of production in fact even in the syllabus we have four factors of production now before even dwelling into all of that of that type of stuff let's just get the basic gist of what exactly economics is now under economics the reason why we have economics is because first of all is that us humans we always want more and more but there's a there's a consequence with that because we do not have enough resources for that right because because if there's only a limited amount of diamonds us humans cannot have needless amount we cannot have unlimited amounts of products with diamonds because we have fewer Diamond resources so that's where the subject economics comes into play economics looks at the resources looks at our wants looks at our needs and it comes up with a solution and that is exactly what economics is in just a simple summary again do not need to understand this I will keep uh referring back to the syllabus because here it says that the economics right just looking at economics is that we just need to know that economics we just need to know about the economic problem we don't need to know what economics is so we'll come to that uh in in in just um in just some time okay so um with that being said with that being said let's go to the next part of this and now let's have an actual look at what exactly the nature of the economic problem is let's have a look at the nature of the economic problem so I'm going just going to paste that right here okay so let us reduce the size okay let's look at the nature of the economic problem okay what comes under the nature of the economic problem now this is actually where the the fundamentals of econom ecomics starts from okay this is actually why we have economics it's because of this economic problem now to to Define economic problem what you need to understand is that let's say I have this product here and let's call this product a now us humans we always want more and more right it's just the human nature right it's the human nature to want more for example if I have uh let's say a Ferrari right I've bought a Ferrari as a human I'm going to get tired of that Ferrari and then I want a Bugatti for example right that's just an example of that or in a in a more like simpler term let's say if I have a gold watch okay then I want a diamond watch now after I have a diamond watch I want a tanzanite watch okay I just want more rare and rare because that is just what a human wants that's the human nature I want better and better right and that's okay that's right that's that's understandable if I have a smaller house I want a bigger house if I have a smaller car I want a bigger car okay and this works for any product so let's say you know all these humans they want this product a for example they want this product a now to make product a we have smaller resources here right let's say for example product a is a is a house okay what what is comprised of a house we have wood we have metal we have you know glass and stuff like that that makes up a house now we don't have unlimited wood do we right we have to cut down trees trees and that removes you know that removes the wood so there will be at one time or one point of the life where we would have trees okay but of course there's planting and stuff like that but let's say you cannot replace that object let's say like diamonds you cannot you cannot grow more diamonds can you it's a limited it's a limited good so the economic problem what it deals with is first of all we have resources okay so these are called resources okay these are called resources resources are the inputs required for the production of goods and services right this is the first definition that we need to understand here is what is Resources with resources these are just inputs that are required for the production of the goods and services it is the inputs that are required to make this product a right here okay now what is the economic problem another definition that you must remember is something called scarcity okay this will you will hear this quite a lot of throughout the syllabus but what is scarcity scarcity is a lack of something okay it's a lack of something okay what does that mean now in the economic problem or the fundamental economic problem is that there is scarcity of resources what does scarcity mean okay I said it's a lack of something scarcity means that there's not finite there's there's not infinite there's finite that means there are are only limited amounts of resources I don't know if you're trying you're understanding this right so if we have an object we don't have unlimited objects okay and the best example I like to give is for diamond and gold we do not have unlimited diamonds and gold and we cannot make again and again diamond and gold right so those goods are scarce okay and in economics this term is very important and this term is called scarcity okay so scarcity is when there's a lack of something there's not enough resources to make something okay so what is the economic problem in in in just the whole like a quick you know if you want to just quickly just say just talk about what exactly is this um you know economic problem in just one sentence you need to say that the fundamental economic problem is that there is scarcity of resources to satisfy the human wants and needs remember what scarcity is we said what is scarcity scarcity we said scarcity is when there's a lack of something when there's limited so there's limited resources but we need to satisfy everyone and that is what the economic problem is people want more and more but we have limited Goods that is what the economic problem is okay so there are finite resources and unlimited ones there are limited resources there are only a few number of resources but the ons from the humans are unlimited I will never end my wants I will keep wanting more and more and that is the human nature okay so that is the economic problem the economic problem simply states that I have only this many resources but these people want this much products out of this so that is the economic problem and that is what economics does and that's how it tackles stuff like that okay and that's where price comes into picture that's where Supply comes into picture that's where demand comes into picture there's a lot of other factors and and to control this economic problem we do a lot of stuff and that's exactly what we study in this syllabus in this course okay so um in the in the syllabus I believe they have said that we need to know the economic problem um in the context of consumers workers producers and governments and you will understand this more later into the syllabus because uh when we when we talk about like for example the consumers for a consumer stuff like diamond Goods that is the that is my scarcity or that my economic problem for governments the economic problem would be um you know employment and okay not actually employment but there'll be other other contexts of in terms of government but that will come later on okay so we will look more into the different types of goods and stuff for the government and the the the producers and the workers right for producers they look at the different uh products that make their the different resources that make their products so those resources are finite resources and there's unlimited ones so that is exactly what the economic problem is so I'm hoping you've understood what this economic problem is is in a simple like terminology the economic problem is when we have fewer resources or we have limited resources and we have unlimited ones we want we we we want to make 100 diamond watches but we only have 50 diamonds example of just a quick example and how do I control this like you will learn this later but a quick way to control is increase the price so that not everyone can afford it because Diamond that's the reason why diamond is very expensive is because there is finite there is limited of that amount so only the rich can afford it so all the people if because I I want I I want diamond but can I afford Diamond no so you know like that I can be eliminated okay so I'm hoping you have understood what the economic problem is let's move on to the next phrase that you need to understand and that is the economic Goods now economic Goods so here is the definition of what the economic goods are so if I paste it right here economic Goods okay economic goods are those which are scarse in Supply and so they can only be produced with an economic cost or consumed with a price so economic goods are Goods that are made with scarse resources these are Goods that are scarse these are Goods that are made with resources that are not unlimited right they're made Limited now there's two types of goods there's actually a good that is actually not scarse and an example of that is sunlight we will never run out of sunlight okay so if there's a product relating to or a good actually sunlight is the type of good so if we are relying on resources such as the sunlight that is actually unlimited but what we mainly have the problem with is actually economic Goods so economic goods are those which are scarce in Supply and so can only be produced with an economic cost or with price and that's why we put price and and that's actually how price was introduced okay so in other words an economy good is simply a good with an opportunity cost now what opportunity cost is you might have learned in your class I don't know depending on when you're watching this video but this is a very common term opportunity cost we will learn in just in this video but in just a few minutes okay opportunity cost is simply when I have two products I have product a I have product B if I pick product a right you know if I pick product a what what happens to B right I have to pick between two I cannot afford everything I have to pick between two so that's just a a small like a brief explanation of opportunity cost but we'll come into that in into detail later okay so for now you can ignore that but in economy good you need to know this for now economy good has an opportunity cost and you also need to know that economic goods are those goods that are made with scarse resources okay and then now let's have a look at the free good so if I get the definition of the free good as well so free Goods as I as I simply said was um with free Goods it was these are Goods that are unlimited right so for example it's sunlight okay so these are simple simply Goods that are abundant in Supply that means that they're unlimited and an example to that is air you know air will never run out will it sunlight will never run out will it okay so those are called free Goods so very very important to understand the the the difference between an economic good and a free good we need to know first an economic good is a good that are made of scarse resources it has opportunity cost um it's made up with resources that are limited in Supply and free goods are Goods that are abundant in Supply meaning they never run out they're unlimited for example is air for example sunlight okay so you you will need to know um or you will need to understand an examples of that so in case they give you an example like for example they tell you uh give an example of an economy good okay so you would say a diamond watch a Ferrari uh uh many there's many options and uh then there's like free good now I don't know if i' I've talked about this but um we we usually like to uh this is kind of common knowledge but we need to know what a need is and want um we need to know this right and I'm not sure whether we talk about this later we do not talk about this later I think so let's let's clear it right now this is a very small topic this is a very small subtopic actually but we need to know what needs are and what wants are now a need is something that is necessary okay something like shelter something like food okay I need this to survive it's a need right it is it is a must to have it and ones are something that I can live off with I can live without it but it's the human nature for the wants right for the needs an example as the the best example I would like to say is food right you you need food right it's a need you cannot live without without this food right but with wants they're all luxuries mostly we Define this as luxuries right a want is a luxury a need is a necessity okay that's just that's all you need to know to be honest that's all you need to know in a simple explanation is a need is a necessity it's something that I have to I cannot live without that shelter I cannot live without it I cannot of course I can but in the long run you know you cannot food you cannot water you cannot right stuff like that so those are needs those are products or or those those are human needs and a human want is is a luxury right I want a car I want a fancy house I want a um you know a very good bed or there's many examples I can give I want a better kitchen or there there's so many examples right so those are ones okay and those are luxuries okay so I just wanted to uh introduce that right now in the start because we we will be hearing a lot of need one need one throughout this entire course so it's very important to understand what I mean by needs and what I mean by wants it's a simple topic but you need to understand that okay so so far I'm hoping you have understood what the economic problem is the economic problem is is in in again I'm going to say it again and again is is when we have scarse resources and unlimited ones okay that that's just a simple definition uh then we need to know economy goods and free Goods we need to know the difference between them we need to know an example of economic Goods we need to know an example of free goods and then finally you need to know the difference between needs and wants so I'm hoping so far so good uh we've just done a quick um quick introduction of this course actually uh and what we're going to be studying throughout this entire uh syllabus uh now uh a very important part of this chapter is the factors of production okay so now I'm going to introduce to you what exactly these factors of production are okay so when I'm when I'm talking about factors of production what exactly is these factors of production so let's now have a look at factors of production we have four factors of production okay and first of all actually let's let's let's let's Define factors of production you don't need to know what factors of production is first of all and I think um if you want the exact notes if you want the exact stuff that you you need to know you look at the syllabus that is the best thing you need to know so do I need to know the definition of this you look at the syllabus okay because in this course my main aim is for you to understand everything okay because economics is a subject where you have to understand every topic in order to answer the questions especially those eight Mark questions you know you need to understand you know the topics in order to answer them okay so some people you know they say uh this textbook is giving so much unnecessary information this video is giving so much unnecessary information it's actually not unnecessary and in fact in my videos I will only give you the the knowledge that you need to know okay and that's maybe the difference from me to the textbook yes I might give extra examples yes I might give extra information in terms of like you don't need to know um some more detailed stuff but it's only for your own understanding okay always revise according to the time you have this course is very helpful if you go over each make your notes look at the notes um look at the C and you can memorize according to that so watch these videos understand the topic then go and revise the notes go and cram the notes and that's how economics is to be done okay but let's let's not go over to that route okay let's have a look at what the factors of production is so I said the factors of production are are just resources okay resources are also called factors of production okay and we have four factors of production and I like to remember this by C okay but of course people will just uh remember this you don't need a pneumonic for this um you'll just have to remember because they're they have they're told so many times they're mentioned so many times that you'll just remember them okay but just for just for the purposes of this I'm just going to say the you remember it through cell okay so we have four the the four are capital Enterprise and labor those are the four okay and we're just going to go straight into the factors of production let's not waste any time let's go straight and you will understand as we go on you will understand uh as as we do it you will understand as we do it okay so let's start off with land okay let's start off with what land is first of all so let's let's start off with what land is okay so let's start off with what land is now land land are all natural resources in an economy that's it one sentence we're done let's move on to labor okay um yeah I mean that's kind of it self-explanatory land what is land these are natural resources that are on or inside the surface of the Earth okay so those are natural resources in the economy so this includes the surface as I've just said here and um these are like Earth lakes rivers Forest these are lands okay these are all natural resour resources these are resources that I obtain from the earth okay diamonds gold I don't know I've been saying diamonds a lot uh throughout this video I think we'll change the examples um in different videos so that you guys don't get bored of of me saying the same same example again and again but uh let's keep it diamonds okay diamonds is is is a very good um example in in economics and cars and stuff like that so if if you see me mention these types of stuff you know that is that is just easy to explain I think easy to understand as well but let me know okay but let me know if if it's if you don't want diamonds okay I'll use gold I'll use silver um but yeah so land is all natural resources in an economy uh I think that's pretty straightforward um so anything I find on the land anything I find inside the land those are all called land okay so under the factors of production all natural resources now for all all factors of production you we need to always mention the reward okay we need to always mention the reward so we will need to know the reward for land we will need to know the reward for labor we will need to know the the rent uh the the reward for all of the other two um so the reward for land okay the reward for land is actually um rent okay and this is something that you just need to cram right the reward for land is rent okay something that you need to just cram okay so the reward for land is rent and um yeah that's pretty much it right because it's land the the reward is the rent and this you just have to cram that anytime they ask you what's the reward for what is the reward for uh oops what is the reward for um for labor you say it what is the reward for land you say it okay now it says since the amount of land in existence always stays the same you need to say that the supply is said to be fixed okay this is very important right the amount of land land never changes okay what do I mean by this as in I'm never going to get more land will I this world will never get another content is it it's never going to unless like it splits or something but it's never going to add more resources I'm never going to like you know just discover more diamonds of course you can discover as in it just doesn't generate right it doesn't keep adding land it doesn't keep adding these natural resources so these natural resources is we need to say that the supply is said to be fixed okay so that's something that I just need to add um in case you you you didn't know that so you have to uh have a look at that as well okay so land never changes the land never changes okay and another thing you need to have a look at in any of the factors of production we need to look at the um they always say the quality and uh the quality yeah let's look at the Quality okay what about the quality of land now the quality of land depends upon the fertility soil type WEA now you might be asking myself why are you talking about this stuff why are you talking about quality why are you talking about said to be fixed now the reason when we talk about factors of production right so these are the resources that are actually used to make the goods okay so you need to know particularly the types of resources that you use and that's called factors of production the first one is land how do I determine land so land is first of all you need to know is limited okay as I said I kept saying it Supply is said to be fixed the quality depends on the soil type the fertility the weather okay and also you need to mention now we can I can introduce this is something called Mobility Mobility okay Mobility is is you don't need another definition but uh Mobility the the what the meaning of Mobility means is how easy I can change the use okay that is mobility now we have two types of mobility in economics we we have geographically IM mobility and we have occupationally immobility okay so land is first of all I cannot change land I cannot move land around so we say that land okay we say that land is geographically immobile okay we say that land is geographically immobile because we cannot change change land around we cannot take land from point A to point B we cannot okay but since it can be used for a variety of economic activities meaning because I can use it for many um because I can use it for a lot of stuff right I can use land for farming I can use land for uh civilization I can use land for building something I can use it for mining land has a lot of uses so we say that land is occupationally occupationally mobile now from these two definitions I think you will already understand what geographically means what occupationally means geographically we talk about moving around this this land or something like that occupationally we look at the use we look at the the use of this land right how we using this land so this land is geographically immobile because I cannot change land around and occupationally mobile meaning I can use it a lot now this is very important when we're looking at the characteristics of just land okay so that's why I'm talking about this and that's pretty much it for land so first of all what you need to know main things you need to know for land is first of all it's natural resources in an economy the reward is rent and we need to know that it's geographically immobile and occupationally mobile okay I'm hoping you understand what these two terms mean geographically immobile means I cannot change around occupationally mobile means it has different uses I'm going to say it again and again because um this it just enters into your mind right if I keep repeating something again and again you'll be like oh yeah this guy keep saying this this guy keep saying this right and that's just going to how it's just going to enter your brain so if that is annoying that is just how I teach okay you're going to you're going to thank me later okay so that is all for land okay let's have a look at labor now let's look at the the definition of labor now the simple definition of Labor so if I come across here let's paste it uh let's go to the new page and let's paste it here let's look at labor now okay when I talk about labor labor is all the human resources available in an economy okay so labor would be all the human resources that is available now Human Resources when I think of human re resources what I what is human resources right Human Resources is everything that I do like lab by self-explanatory but I'm just going to say it because I'm I'm going to I'm going to still teach it because it's part of the syllabus I'm going to teach it like you've never heard of labor but I know everyone has heard of what labor is labor is when us humans actually give a skill it's actually give a resource it's actually called a resource because we're giving a skill so it is the mental and physical efforts okay it is the mental and physical efforts and skills of workers to is what is actually what labor is okay so I'm hoping that's understood again labor is all these the resource that we provide because of our mental and physical efforts okay because of those skills that is what labor is and this is actually a type of resource right because in a company we can use land which is natural resources we can use labor we can use Enterprise we can use Capital so you're going to actually see how everything ties up right economics everything ties up and and I want to make a video of a mind map where everything is tying up to each other and and you will understand the importance of everything right how land labor Capital Enterprise all join into factors ofct production how factors of production influence economic problem how economic problem influences this that blah blah blah and that's actually how economics is it's a whole hierarchy it's all tied all together and then that's how it works okay uh let's look at the reward for this um let's look at the reward for labor the reward is um so if I paste it right here the reward here is that it is wages and salaries so the reward is for work the reward for work is wages and salaries okay that's why for land the reward was Rent U maybe if you want to understand it in a way that land is is you can rent out land for labor you can you you have to pay through wages right so that's the reward of it so if I the reward for a labor resource is actually wages let's look at the supply of labor the supply of labor when we're talking about the supply of labor you need to say that the supply of labor depends upon the number of workers right um and and what is this dependent on now we have a whole topic on workers later on the syllabus so I don't want to go that much into detail but the supply of labor in simple terms is depending on the number of workers and this depends on the population size the years of schooling the retirement age the age structure the and a lot of stuff and you'll learn this actually in um a future chapter so I'm just using that that knowledge and applying it here so the supply of labor depends on a lot of factors and and one of the factors is is actually the population size if I have a big population size I'll have more labor right if I have um you know workers at like an age above 18 I'll have way more labor I'll have way more workers if my retirement age is much higher than another country then my labor will be more okay because there'll be more people working so that's actually uh how the supply of labor is influenced um and the number of hours they work is also influenced depending on um the number of holidays the length of sick leaves um if it's a full-time part-time so on so forth so uh two things that you need to know for Supply uh one is the supply of labor depends on the number of workers and I I give factors such as population size uh retirement age age structure and uh the number of hours that they work depends also per country country wise and it would depend for example number of holidays sick leaves length of s Cleaves um parttime fulltime so on so forth when talking about the quality and did we talk about the quality of land yes we did so we talked about the quality of land and we said this depends on soul type fertility what about the quality of Labor when we look at the um when we look at the Quality quality of Labor we say that it will depend upon the skills and the education so quality depends on the education uh that you have right the if you have a a degree a master's degree it depends on the education you have so that depends on the skills and and that's actually how the quality is affected so with land the qu the quality affects Ed by the soil type weather and for labor it depends on the education okay now let's look at the like occup let's look at the mobility for this okay uh let's look at the mobility um so coming across to Mobility let's look at the mobility of labor now the mobility of Labor depends on various factors uh first of all labor can be very occupational Mobility highly occupational Mobility but it depends again on the type of job now if I have the right skills so if I have the right right skills right if I have the right skills okay then I can keep switching my job right the use is different right I have a lot of use right the ability to change jobs that's what occupational immobility is the ability to keep changing jobs so if I have a lot of skills if I have the right skills and if my skills are improving over time then that means that you know I will be highly occupational mobile what about geographical Mobility geographical Mobility as we said is the it's how I change the location for my work for example and this depends on a lot of stuff for example Family Ties right if my family is in this country maybe I don't want to switch my job to another country or costs or VISA stuff like that laws regulations on travel and work could be another limiting factor of going to another country okay but it is geographically mobile so both it is occupationally mobile and it is geographically mobile but they both have their factors that you need to understand okay so that's what you need to know I'll put a website link of all the notes that uh um that you need to revise so after this video go over that and have a look at that as well okay let's go over the next um the next factor of production and the next factor of production is capital okay this is a short one capital capital is just man-made resources okay capital is just man-made resources so let's define capital okay let's define capital capital as you can say are all man-made resources that are available in the economy and these are all man-made Goods an example here would be Machinery those are all capital goods um and these Goods to understand whether it's a capital good capital goods help make more capital goods or help produce other Goods okay so it's a good that helps make other Goods uh an example for this is when you're you're making a car you see even even these notes here they're using cars and as an example so uh it's just a good it's just a universal example right it's just uh like if you if you do computer science uh and in my channel I do teach computer science they always teach print hello world it's just a universal type of uh code but let's let's not Swift all the way to that but capital is a good that makes other Goods simple terms very easy um to understand what is the reward of capital the reward for capital is interest the reward for capital is in fact interest okay so the reward for capital is interest okay the reward for capital is interest that it receives so so far we've had a we've had a look at land so land what is the the the reward it's rent what is the reward for labor it is um um it's wages it is it is salaries what is the reward for Capital it is interest okay now the supply of capital depends on the demand of goods so if there is a lot of Demands for cars the capital goods will increase right um so that's just how the supply of capital depends on the demand for goods the quality of let's have a look at the quality the quality of capital depends on how many Goods how many good quality products can be produced using their given capital okay for example um so uh if you have better technology if you have better Machinery you will have better Goods better quality Goods so depending on your capital good so depending on how good your capital good is your your your goods will will respond accordingly and when we're talking about Mobility when we're talking about Mobility we we just uh say that first of all it depends on the so if I can actually show you here that Capital Mobility depends on the nature and the use of this capital goods so if I just paste it right here is that Capital Mobility depends actually on the nature and the use of capital for example an office building is geographically immobile right it's still counted as capital because I'm making more Goods but it is geographically immobile but is occupationally mobile meaning it has many uses an office building has many uses but rather I cannot move one Building from here all the way till here it's it's just geographically immobile so again it depends so for this Mobility type of part of every factor of production you need to understand more of what exactly is mobility and then using that you can decide oh is this geographically mobile is this occupationally mobile so that's actually the trick so there you go that is capital done we've done labor we've done uh land let's move on to the last one and the last one is actually Enterprise okay so Enterprise what is enterprise you might know Enterprise outside of what economics is if and this is again I'm assuming you've never done economics but Enterprise is um yeah so if you you might have heard of this outside the outside this syllabus but Enterprise is the ability to take risks and run a business venture okay so an Enterprise is me if I decide to take risks right and the keyw here is actually risks it's the ability to take these risks and and that's actually called an Enterprise okay so a person who who has an Enterprise now an Enterprise is actually the firm who who takes this risk and starts this business so an Enterprise is called and a person who runs this Enterprise is actually called an entrepreneur and you must have heard this countless amount of times of course in Tik toks and shorts and stuff like that you must have heard an entrepreneur uh making this much money this much money um so an Enterprise is actually the ability to take risks start a business and that's uh whoever starts this is called the entrepreneur okay so they are people who start businesses and um they actually organize all the factors of production they take the risks they make the necessary dis uh necessary decisions and they run the firm so an Enterprise actually uses all the other three factors of production to make that business happen What happens to the reward what is the reward of this let's have a look at that now the reward of Enterprise is profit that is generated from the business right this is kind of comp Common Sense okay so the reward of this is actually the profit what about the supply when we're looking at the supply it actually depends on the skills right the supply depends on the the the the skills um yeah so so in it says here the supply okay let me just the supply so the supply of Enterprise is dependent on the entrepreneurial skills it depends on my skills it depends on my creativity on my risk taking on my education on my taxes right and that's how the supply of Enterprise is dependent on it depends on me just me okay and the quality of cost will also depend on um how my how I'm able to satisfy and and and expand the demand in the economy in the most innovative ways so that's quality again depends on me it depends there's nothing like you see with land it depends on on actually the land I can't do anything about it with labor I can do something about it it depends on the quality depends with capital also I can do something about it means High capital goods produce more quality Goods with Enterprises again it depends on my Innovation my creativity skills it depends on stuff like that that actually decide the quality okay so a quick brief of everything is whenever we talk about factors of production okay what are the stuff you need to know first you need to know the definition okay you need to know the definition for each of them second you need to know the rewards for each of them you need to know the rewards for each of them third you need to know the supply of each of them right you need to know the supply how much of a supply are there because land is finite Enterprise is what Enterprise it depends the supply depends on my skills right on Capital again depends on my skills then you need to know about the quality okay and finally you need to know about the mobility Mobility so you need to know these five is it yes these five things for every factor of production and that's all you need to know these for these factors of production Enterprise Mobility Enterprise is usually highly mobile okay both geographically and occupationally so it's both geographically and occupationally again you need to know what Mobility is you know you need to know what geographically Mobility is geographical Mobility is the ability to relocate and occupationally is the use okay so those are that now something that you need to note and and how I'm going to link it with what I said above because I remember I said that economics is always linked okay and how can I link these factors of production with what I mentioned above all these factors of production okay all these factors of production are scarse because the time people have to spend working the different skills they have uh it all scarse because of the following stuff okay so you need to also understand that these all these factors of production are scars in one way or another for example like land of course is scars right we don't have unlimited of that labor is SC right we don't have unlimited labor right we have a population size to look at we have uh a lot of other factors right so that is something that you need to also have a look at okay so if I go back to the syllabus [Music] um if I go to the syllabus right if I look back to the syllabus here we have covered the economic problem we have covered the factors of production let's have a look at the opportunity cost now let's look at what exactly is opportunity cost and then we look at how opportunity cost is is actually linked with production possibility C so this is actually quite quick so first of all what is opportunity cost I think let's start off from there um opportunity cost um the the the definition that you need to know and that's all you need to actually know and I'm not going to waste a lot of time with this but um let's go actually let's go all the way down here paste it right here now opportunity cost is first of all by definition is the next best alternative that is sacrificed forone in order to satisfy the other let's give an example let's say I decided to stay up and study okay and and and let's put this and these are all in the notes by the way so that I'll put down in the description and this is the example okay I'm going to use example too because it's much more simpler okay so example two it says you have decided to stay up and study okay you have to decide I have to decide sorry whether to stay up and study or go to bed and not study okay I have two options okay and this is this is the best way to explain opportunity cost I have two options I have option A and I have option b option A is to study option b is no study okay now if I choose if I choose option b okay if I choose option b okay then the knowledge and preparation that you have gained by staying up is the opportunity cost meaning opportunity cost will be a because I lost it it's the good that is foregone if I pick option b what is the opportunity cost the opportunity cost is a if I choose B the opportunity cost is a if I picked a let's say I picked I want to study if I picked I want to study then my opport cost is B because I will now lack the sleep because I could have slept that's the opportunity cost that is what I lost because of picking a but if I pick B I lost the knowledge that I could have got with a okay so that's all actually what opportunity cost is um the reason why we have opportunity cost is because remember goods are scarce and you have to make a decision right and governments have to make a decision producers have to make a decision which product to make and that is where opportunity cost comes into play okay so you need to always know that opportunity cost is because of the reason why we we talked about in the start it's because of the scarcity of resources means that there's not sufficient Goods to to to satisfy everyone and therefore we need to make a decision and that is what opportunity cost is okay now let's just quickly talk about the production possibility curve what is production possibility curve now production possibility curve is just to represent this opportunity cost it's to help us make these decisions that is actually what production possibility curve is okay now into the production possibility curve what is you need to know the definition of the production possibility curve so let me just copy paste that right now the definition of a production possibility curve okay this is the definition of a production possibility curve okay a production possibility curve diagram shows the maximum combination of two goods that can be produced by an economy within the available resources okay so it's a basically a diagram okay um that shows the combination of two goods it shows the combination of these two goods okay in an economy with all the available resources okay now um yeah so that is what a a production possibility how does it look like let me let me try draw it so if I try draw it a production possibility curve will look something like this okay where we will have good X here for example and we will have good y here okay we have these two curves now with PPC what you need to mainly understand is the different points um that you you need to have a look at so the main two points is that if the point is X if the point here is is like d if it's outside this curve right if it's uh if outside this curve then that means it is called unattainable okay so this means it's called if the if the if the point is here that means it is unattainable what does that mean that means that there is be there it's more than how much resources are existing right means I cannot make it because I don't have those resources it's it's Way Beyond the scope and if the point is inside here that means it is inefficient because this means that I have so many resources but I'm not able to maximize the use of it because if my point now what you need to understand in the PPC curve is there are different points on this curve okay and I've just explained one of them or two of them so if it's outside it's unattainable that means I don't have those many amount of resources to actually make it and if it is inside that means that I have so many resources but I'm not using them properly because it's below the curve and if it is near the curve that means that I'm uh efficiently using all the resources and depending on let's say I pick good X good y depending on the different points now another main thing that you need to understand is the two types of shifts okay there are two types of shifts we have an outward shift and we have an inward shift so we need to understand the different um things with an outward shift and an inward shift so let me just show you um what that is okay so for an outward shift we need to understand why an outward shift can happen Okay because a PPC curve can shift and we need to understand what an why an outward shift can happen so according to this it says an outward shift could happen when I discover more raw materials so it's an outward shift because as I said before remember when it's outside the curve that means I don't have enough resources but when I find these resources is going to be an outward shift so that means this curve from go will go from here to all the way here so it's going to shift outwards okay that's what an outward shift is then if I get new technology right if I get new technology improves the effic icy right in improves the productivity there will be an outward shift if there's an increase in labor force maybe the number of schooling years have reduced there's an increase in the labor force that's again an outward shift an outward shift in a PPC means that there is higher production possibility which will lead to economic growth now this economic growth again we're going to understand all these small small tiny definitions later on in the syllabus let's go with inward shift now inward shift's almost opposite but uh there's different uh reasons to how an inward shift can actually happen so um an inward shift can happen right here as you can see so an inward shift can happen when there are natural disasters so what happens when there's a natural disaster the resources are depleted right so we have less resources so that's when an inward shift will happen when there's low investment in Technologies there'll be an inward shift and when I run run out of resources for example oil and waterers run out then there will another be an inward shift okay so with PPC what do you need to know you need to know the different points first of all when the point is inside when the point is outside you need to know know how to how to draw the PPC we will do more complex drawings of the bpc and so on so forth later uh but a simple understanding of this you need to know uh the point inside the point outside you need to know the the points when it's inside the the curve and then you need to know the two types of shifts which is the outward shift and the inward shift okay um yeah so that's the two things you need to remember and um as I said always I like to always link everything with um what we we talked about is how is opportunity cost look with a PPC curve okay so governments uh businessmen producers consumers they can calculate the opportunity cost from a PPC diagram okay I can always look at a PPC diagram okay for example if [Music] um for example if if if my point is here right that means I am producing more good X and less good y so my opportunity cost for good y right you can calculate it like that because I'm picking good X over good y so my there will be more opportunity cost of good y so using that type of stuff right I can compare you know what to lose what wants you know what is more important and I can compare the opportunity cost for different decisions and actually that is what the production possibility curve is okay and in fact that is the uh I believe the end of this uh chapter and uh I I believe we've covered all of these points and if we have not we will cover them in the next topic because everything is interconnected in economics you will notice that in the next topic we will still be talking about PPC we will still be talking about opportunity cost um but again my aim is for this entire uh video series that we are having I'm hoping you will have a very good understanding of Economics once when we finish all these six videos um so stay tuned for the next video this was the first video the basic economic problem I'll see you in the next video thank you guys for watching hit the Subscribe button comment if you have any questions um and uh hit that like button and I'll see you in the next video guys thank you for watching goodbye