1.

1 The basic economic problem (1)

Resources

Visual aid handout H1: Survival

Key concepts

Scarcity of resources

35

Needs and wants

Objectives

Define the nature of the economic problem (limited resources and unlimited wants)

Introduction (20 minutes)

This is an activity to introduce students to some of

the key issues and problems that economics is
concerned with and therefore what they will be
studying during their course.

Start by asking what students already know about

economics and what they think its study may cover.
List their key points on a blackboard, whiteboard or
overhead projector at the front of the class.

Alternatively, and if students are reluctant to give

their own ideas, ask them whether they think
studying economics will help them to analyse the
following questions:

{{

What will happen when natural minerals and

ores such as oil, zinc, copper and aluminium
eventually run out?

{{

Why do food and energy prices keep rising but

the prices of large-screen televisions keep
falling?

{{

Why do we need to pay taxes?

{{

Why do famous footballers such as David

Beckham earn more than most doctors?

{{

Why is there unemployment?

{{

Why cant all education and health care be

provided for free?

{{

Why is electricity more expensive during the

day than overnight?

{{

Why are some countries so poor and why cant

richer countries give them more money?

In addition to the above questions or as an alternative,

ask students whether or not they think their studies
will cover the following areas and why.

What is
economics about?

Why?

money?

We use money to make

payments; we earn it when we
work; we pay taxes with it; we
save it or invest it; firms earn
it from the sale of goods and
services; we exchange it for
other currencies

business?

Firms supply goods and services;

they provide employment
and pay incomes; they invent
newproducts

how products are

made?

Production uses up scarce

resources; it can pollute the
environment; some methods of
production can cost more than
others

the environment?

The environment can provide

natural resources; it can be
damaged by economic activity;
government may introduce
laws to protect it from some
economic activities

the jobs
peopledo?

People in work produce

goods and services; they are
paid wages; several factors
determine their wages and their
choice of occupations; if there
are insufficient jobs there will
be unemployment
Continued...

Unit 1.1

people and
population?

People produce and consume

goods and services; they supply
their labour; they own land
and other resources; they run
businesses

governments?

Governments determine
economic policies, spend money,
employ people, raise taxes, set
interest rates, introduce laws
that affect our behaviour

international
trade?

International trade involves the

movement of goods, services,
labour and money across
borders; it allows countries to
sell more products; it provides
us with a greater variety of
products, etc.

Add and discuss more questions or areas depending

on the ability of the students and how much time
you wish to devote to this introductory task. Then
move on to the next exercise to introduce the
fundamental problem that the study of economics is
concerned with.

can be listed at the front of class. Responses from each

group should be similar: identifying the need to grow,
gather or hunt sources of food, collect water, gather
wood to produce fire for warmth and cooking, make
clothing from animal skins or the wool from sheep,
build shelters from the cold and thunderstorms, and
develop some way of communicating their presence
on the island to any passing ships or aircraft.

Some groups responses may include items such as

medicines, music or mobile phones, but these can
be quickly ruled out as non-essential for human
survival or, in the case of medicines, as not available
on the island.

The need to gather materials to make tools, spears

and pots etc. to assist with farming, hunting,
collecting water and building shelters, may initially
be overlooked by some students. Asking them how
they will catch fish, store and carry water or build
huts and other shelters will help them to focus.
Additional questions might include: How many
people knew how to build shelters or to make pots,
spears and clothing etc.? Were there enough
suitable materials on the island for these purposes?
How were decisions made and tasks allocated?

This activity can be extended to consider resource

allocation decisions when combined with Activities
2.1 and 2.2 on pages 23 and 24 of the textbook. See
also Unit 2.1 (Economic systems - lesson 1).

Activity: Survival (40 minutes)

The purpose of this exercise is to provide a brief

introduction to the basic economic problem through
the concepts of human needs and scarcity of
resources. In the next lesson human needs for
survival will be contrasted with human wants.

Divide the class into groups of four or five students.

Display handout H1 on an overhead projector or
distribute copies to each group to explain their
situation and objectives.

Allow students 1520 minutes to discuss in their

groups and to list what items they think they will
need, what they will need to do to survive on the
island, and what problems they might encounter,
notably a lack of resources including relevant skills.

At the end of the exercise ask a member of each group

to read out what the groups members agreed. These

Key point summary

Human needs are things that are essential for

human survival.

However, resources are scarce and it may not be

possible for every person to obtain all the things
they need in order to survive.

Next lesson
In the next lesson we will consider:

How scarcity of resources not only prevents many

people from satisfying their basic needs, but also
prevents everyone in the world from satisfying all
their wants.

The basic economic problem: choice and the allocation of resources

1.1 The basic economic problem (2)

Resources

78

Visual aid handout H2: Drought in Africa

Visual aid handout H3: What's the problem?

Key concepts

Scarcity
Needs and wants

Objectives

Define the nature of the economic problem (limited resources and unlimited wants)

Discussion: Drought in Africa

(20 minutes)

Read out to students, or ask them to read, the

article on the Somalia Famine dating from 2011 on
handout H2. The article can usefully reinforce
concepts developed and learned from the first
lesson in the exercise on survival.

Students should be asked to consider whether the

needs of the people in the photographs and described
in the article are being met. If not, why not?

Students should recall from lesson 1 that basic

human needs for survival include food, water, basic
clothing and shelter. These are clearly scarce in the
situation described in the article.

Some students may focus on the need of many of

the people depicted or described for medical help.
This view can be challenged by asking students:
Would as much medical assistance be required if the
people in the article had sufficient food, clean
water, clothing and shelter?

The main cause of scarcity identified in the article is

the lack of rainfall leading to crop failure, farmed
animals dying and increasing malnutrition.
However, the discussion may be widened to
consider why water could not be pumped from
other areas of Africa unaffected by the drought, or
why the people could not buy the food, water and
other supplies they needed from nearby shops.
Concepts such as relative and absolute poverty,
inequality, lack of infrastructure, stage of economic
development, and population growth might also be
briefly introduced during the discussion.

Conclude the discussion by identifying, from the

article, the underlying problem of concern in the
study of economics: scarcity of resources relative to
our human needs and wants. But emphasise that it
is a problem that affects every person in every
country to a greater or lesser extent and not just
the poorest people in the least developed countries.

Discussion: Whats the problem?

(10 minutes)

There is a risk that some students, in this and the

previous lesson, may have concluded that the
problem of scarcity only affects the poorest of
people and the least developed countries, and that
it is not a problem in rich countries such as the
USA, Canada or Germany.

Handout H3 can be used briefly to demonstrate

thatscarcity of resources is widespread and affects
every country.

Activity: Human wants (30 minutes)

Introduce the concept of human wants for different

goods and services using Activity 1.2 (page 7) and/
or Activity 1.3 (page 8) from the textbook. Or ask
students to each suggest at least two products they
really want and then list these at the front of the
class. They should be informed initially that their
desires are not constrained by a lack of money.
A long list should therefore develop very quickly.

Following the exercise ask students to explain how

human wants (things we would like to have
because they give us pleasure or satisfaction) differ
from human needs (the essential things we need to
survive).

Students may quickly understand that they cannot

satisfy all their wants because they do not have
enough money. It is therefore important to widen
the discussion and their understanding of scarcity,
for example, byraising some of the following
questions:
{{

What if everyone in the world all wanted the

same things as the students or even more?

{{

Could absolutely everything everyone wanted

be produced?

Unit 1.1

{{

{{

Are there enough raw materials, labour,

machinery, factories and other resources in the
world to provide all the things that people
want?
As the global population grows (from 7 billion
now to a predicted 9billion by 2050) what will
happen to the total of our needs and wants?

In some countries resources are so scarce even the

basic needs of some people cannot be met.

Our needs and wants will continue to grow as the

world population increases.

Because there is scarcity of resources we must all

make choices about how best to use them, i.e. what
goods and services to make with them and therefore
which needs and wants to satisfy.

Key point summary

We need basic foodstuffs, shelter, clothing and

clean water to survive.

In contrast, our wants for other goods and services

are without limit.

Scarcity of resources relative to human wants is a

global problem: there are just not enough resources
in the world to satisfy all our wants.

Next lesson
In the next lesson we will consider:

Production, consumption and the cost of

makingchoices.

1.1 The basic economic problem (3)

Resources

46

915

Visual aid handout H4: Whats in a car?

Visual aid handout H5: The next best thing?

Key concepts

Production and consumption

Factors of production
Scarcity and choice
Opportunity cost
Resource allocation

Objectives

Define the factors of production (land, labour, capital, and enterprise)

Define opportunity cost and analyse particular circumstances to illustrate the concept
Evaluate the implications of particular courses of action in terms of their opportunity cost
satisfying our need for food; when we eat cakes we
are satisfying our wants for a sweet tasting treat;
when we buy and listen to a music CD or download
we are satisfying our want for entertainment, etc.
Consumption therefore involves using up goods and
services.

Introduction (15 minutes)

Brief reminder of the last lesson.

Introduce the concept of production: using resources

(inputs) to make and deliver goods and services (the
products or outputs of production processes) tosatisfy
our needs and wants. Entrepreneurs are people who
organize production in organizations called firms.

Introduce the concepts of consumption and

consumers: people and organizations that use up
goods and services to satisfy their needs and wants.
List some examples: when we eat bread we are

The main problem is that there are not enough

resources to produce everything we need and want.
Every society must therefore choose how best to
allocate its resources: what goods and services to
produce and which needs and wants to satisfy.

The basic economic problem: choice and the allocation of resources

Activity: Whats in a car? (15 minutes)

Use handout H4 to demonstrate just some of the

resources used up in the production of a car.
Introduce the concept of factors of production
(scarce resources used up in the production of goods
and services). Ask students to classify the resources
listed on handout H4 as land (all natural resources),
capital (man-made resources) or labour (human
effort). At the front of the class, list separately or use
a different colour pen to identify the resources listed
on handout H4 as either land, capital or labour.
Following the exercise, introduce the concept of
enterprise (the ability to organize resources into
firms to produce goods and services a skill
possessed by entrepreneurs).

Key point summary

Production uses up resources to make and deliver

goods and services to consumers to satisfy their
needs and wants.

Consumption is the use of goods and services by

consumers to satisfy their needs and wants.

Resources used in the production of goods and

services are known as factors of production.

Entrepreneurs organize resources into firms to

produce goods and services (or products these are
the outputs of productive activities).

Because resources are scarce relative to human

wants, all societies must choose how to allocate
them between different uses: what goods and
services to produce and which needs and wants to
satisfy. Not all needs and wants can be satisfied.

Reallocating resources, therefore, always involves

an opportunity cost in terms of what we have to
give up in return.

Opportunity cost is the cost of choosing between

alternative uses ofresources. Choosing one use will
always mean giving up the opportunity to use
resources in another way.

Alternatively, or as a homework activity, ask students

to complete Activity 1.1 on page 6 of the textbook.

Discussion: Opportunity choice

(30 minutes)

Students should by now understand that, because

resources are scarce relative to our wants, we must
decide how to best to use them. Thisinvolves
choosing between alternative uses what goods and
servicesto produce and, therefore, which needs and
wants will be satisfied. Economics is concerned with
these choices how individuals, firms and
governments make them and the consequences of
their decisions.
For example, the resources used to produce cars from
the previous activity could be used instead to produce
other goods and services. However, if some of the
resources are moved or reallocated to the production
of other products, such as computers, then fewer cars
will be produced. More computers will mean fewer
cars are available for people to consume. The loss or
sacrifice of cars is the true cost of the decision to make
more computers.

To reinforce concepts explored in the lesson,

students can complete Activities 1.4, 1.5 and/or 1.6
from the textbook (pages 1112) as a class exercise
or as homework.

Next lesson
In the next lesson we will:

Remember what has been learned so far about the

basic economic problem

Demonstrate resource allocation decisions and

opportunity costs using production possibility curves
or frontiers.

Use handout H5 to introduce the concept of

opportunity cost. Stimulus questions to prompt
discussion might include:
{{

What is the economic problem in each of the

articles?

{{

For each decision described in the articles, what

is being sacrificed andwhy?

{{

Who are the winners and who are the losers

from these decisions?

Unit 1.1

1.1 The basic economic problem (4)

Resources

315

Slide presentation S1: The basic economic problem

Worksheet 1

Key concepts

Factors of production
Production and consumption
Resource allocation
Scarcity and choice
Opportunity cost
Production possibility curves (PPCs) or production possibility frontiers

Objectives

Demonstrate how production possibility curves (PPCs) can be used to illustrate choice and resource
allocation

Slide presentation: The basic economic

problem (30 minutes)

Use slide presentation S1 to revise and reinforce the

concepts learned in lessons 13, and to introduce
PPCs as a simple way of illustrating choice and
resource allocation.

The slide presentation reproduces the PPC diagrams

from page 13 of the textbook. The first diagram
shows how if all resources are devoted to the
production of cars, then the maximum number of
cars that can be produced each week is 100.
Alternatively, a maximum of 120 trucks can be
produced each week with the same resources.
Increasing the output of one product means
sacrificing more of the other.

Students can be introduced to the concept of

efficiency: if some resources are left idle or if
production is inefficient, then an economy will fail
to produce as much as it could with its available
resources. Fewer goods and services will be
available, fewer needs and wants will be satisfied
and living standards or economic welfare will be
lower than they could otherwise be.

Other combinations of products can be used to

illustrate opportunity costs using PPCs instead of
those in the slides. Examples are a hospital choosing
between different treatments; students deciding
how to allocate their time between economics
revision or leisure; a government choosing between
building more schools or more roads.

Worksheet 1 (30 minutes)

Students can consolidate their learning by completing
Worksheet 1 in class and/or as homework.

Key point summary

The most efficient allocation of scarce resources will

be the one that satisfies the most needs and wants it
possibly can. It will maximize economic welfare
from available resources.

A PPC can be used to demonstrate opportunity cost

and the most efficient allocation of resources between
competing uses in a simple diagram. Moving along a
PPC means more of one product will be produced but
at the expense of another or all others.

The basic economic problem: choice and the allocation of resources

H1 Drought
H2
Survivalin Africa

1.1 The basic economic problem

Somalia Famine: Dadaab Refugee Camp In Kenya at More

Than Four Times Capacity

Faduma Sakow Abdullahi and her five children

tried to escape starvation in Somalia by journeying
to a Kenyan refugee camp. Only one day before
they reached their destination, her four-year-old
daughter and five-year-old son died of exhaustion
and hunger.

than 42,000 of the newly arrived refugees waiting

outside the camp boundaries because there is
nowhere to fit them inside. Dadaab was originally
built for 90,000 people but more than 382,000
are now here.

Tens of thousands of Somalis have watched

She saw more than 20 other children dead or their land dry up after years without rain. Then
unconscious abandoned on the roadside. their livestock died. Finally all the food ran out.
Eventually a passing car rescued the rest of her Now they are making the perilous journey over
family from what could have been death.
parched earth to refugee camps in Kenya and
I never thought I would live to see this horror, Ethiopia, regions that also have been hit hard
she said, tears rolling down her cheeks as she by drought.
described the 37-day trek to Dadaab, the worlds The World Food Program estimates that at least
largest refugee camp.
8.8 million people in Somalia, Djibouti, Ethiopia,
Presently about 1,300 people arrive at Dadaab Kenya and Uganda have been affected by the
from Somalia each day in search of food, water, drought and will need food aid.
medical help and shelter. There are now more

Brian Titley 2012: this may be reproduced for class use solely for the purchasers institute