1. Lesson Objectives All students will understand Most students will
The concept of scarcity and choice
Most students will
be able to apply this to potential trade-offs
Some students will
Understand the complexities of trade-offs faced by government at all levels
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2. Market Forces The private sector is led by market forces
By Market forces we mean Demand and Supply interacting to determine price, output and the allocation of resources.

3. Scarcity and Choice The problem of scarcity is key to Economics.
Human wants are unlimited – but resources are NOT unlimited, there is a finite amount of resources.
Because of this consumers have to make choices, and these decisions will be based on individual preferences
Opportunity Cost becomes important when making these choices
Some resources are more scarce than others

4. Consumer Sovereignty
Consumers choose to purchase the products they value the most, they make choices based on the value they see in the product
This suggests that consumers ultimately decide what will be produced, by choosing what to buy
This power is called consumer sovereignty

5. Task

6. Task Using case study on previous page answer the following
Is water a Need or Want?
Wright a paragraph on your mini whiteboards to explain this, include the word scarcity in your answer

7. Opportunity Cost Definition
The cost expressed in terms of the next best alternative foregone or sacrificed.
Note - The language used here is a bit technical but it expresses a very easy but often misunderstood principle. We need to unpick the definition to help get the understanding right. Cost implies something is being sacrificed or involves having to give up something. We often use the term 'cost' in the wrong way. How many times have you used 'cost' when you mean 'price'?

8. Opportunity Cost Is something given up when we make a choice
E.g. If I have £1 in my pocket and feel hungry I might buy a Mars bar, but I also feel like buying a Snickers bar, but cannot afford both!
I decide to buy the Mars bar – the financial cost is 60 pence – but what is the opportunity cost?
The opportunity cost is the Snickers bar – the thing given up due to the scarcity of my money

9. Task
The Mars/Snickers example is very basic, but this concept can be much more complex, e.g.
On your
list the potential opportunity cost of the following
The Government buying a new aircraft carrier for the Navy
Beauchamps High School building a new 6th Form common Room

10. Trade-Offs
Opportunity Cost draws attention to the trade-offs involved in making decisions
Limited resources means we can’t have everything we want so we have to make decisions that involve trade-offs
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11. Trade Offs
When decision makers are debating a decision they will consider positive economic factors and normative economic factors.
Positive statements are testable as true or false, backed by facts
Normative statements are based on opinions and viewpoints – sometimes called value judgements

12. Task Show your understanding pg 4 – on your
Exam style Question pg 5 – Q2 & Q4