Curriculum check: ✓ Edexcel ✓ OCR
Scarcity arises when material human demand outweighs the amount of resources needed to fulfil it. Consumers, producers and the government therefore have to make choices over what to, consume, product, or allocate – this is the basic economic problem.
Every time a consumer, producer, or government chooses amongst scarce resources, they sacrifice the next best alternative. If a firm has £100,000 to invest, and it chooses to spend it all on new equipment, it forgoes the opportunity to hire new employees.
What’s the opportunity cost of you spending time reading these notes?
Renewable and non-renewable resources
Resources can be classified into four factors of productions: land, labour, capital & enterprise. They are both renewable (replenishes naturally over a period of time) and non-renewable (a finite stock which decreases over time).