IB Economics: Scarcity and Choice

Introduction to Economics

• Economics deals primarily with scarcity and choice.
• Fundamental economic problem: scarcity leads to choices and opportunity costs.
• Economics is a social science involving the study of how scarce resources satisfy unlimited wants.

Key Concepts in Economics

• Scarcity: Limited resources vs. infinite wants.
• Choice: Decisions must be made about the allocation of resources.
• Opportunity Cost: The next best alternative foregone when a choice is made.

Economics as a Social Science

• Economics uses scientific methods to explain behavior related to scarcity.
• Involves observation, deduction, and construction of abstract models.

Microeconomics vs. Macroeconomics

• Microeconomics: Focuses on individual agents (households, firms, markets).
• Macroeconomics: Deals with the economy as a whole (production, consumption, employment).

Central Concepts in Economics

• Well-being: Equity vs. equality; fairness in economic outcomes.
• Change: Constant changes in economic variables and global events.
• Sustainability: Meeting present needs without compromising future generations.
• Interdependence: Economic actors are interconnected globally.
• Efficiency: Optimal use of resources to maximize output.
• Intervention: Government involvement to correct market failures.

Factors of Production

• Land: Natural resources for production.
• Labour: Human input and skills in production.
• Capital: Investment in goods for future production.
• Enterprise: Risk-taking and innovation in business.

Economic Systems

• Traditional Economies: Decisions based on customs.
• Command Economies: Government-controlled production and distribution.
• Market Economies: Price-driven decisions by buyers and sellers.
• Mixed Economies: Combination of command and market systems.

Economic Problems and Solutions

• Allocation of Resources: Deciding what and how much to produce.
• Economic Efficiency: Using resources without waste.
• Full Employment: Ensuring all available resources are utilized.
• Economic Growth: Increasing productive capacity and living standards.

Market vs. Government Intervention

• Debate on extent of government involvement in markets.
• Pro-Intervention: Corrects market failures, redistributes wealth, disaster relief.
• Against Intervention: Risk of inefficient government decisions, loss of personal freedom.

Conclusion

• Economics is central to making informed decisions on resource allocation, efficiency, and equity.
• The study of economics helps understand and address fundamental issues like scarcity and choice.