Scarcity, Choice and Potential Conflicts

What Scarcity, Choice and Potential Conflicts covers

Scarcity, Choice and Potential Conflicts is examined in Paper 1, Markets and how they work, and in Paper 3, The economic environment and business. It covers scarcity and the economic problem, choice, trade-offs and opportunity cost, profit maximisation, sales maximisation and satisficing, survival, market share and other business objectives, stakeholders and their objectives and stakeholder conflicts and corporate social responsibility.

The 6 subtopics

Each one has its own page.

• Scarcity and the economic problemScarcity as the fundamental economic problem, the three questions every economy must answer, wants against needs, economic resources, free and economic goods, scarcity for a single firm, population growth and economic growth, finite and renewable resources, and rationing.Open →
• Choice, trade-offs and opportunity costOpportunity cost and the next best alternative, trade-offs and how they differ from opportunity cost, the opportunity cost of choices by students, firms and government, the consumer's budget constraint, price against quality and wages against profit, spare capacity, and accounting cost against economic cost.Open →
• Profit maximisation, sales maximisation and satisficingProfit maximisation and its marginal condition, why firms pursue it, sales maximisation and why managers or new entrants prefer it, revenue against sales volume maximisation, satisficing, the divorce of ownership from control, the principal-agent problem and asymmetric information, and the risks of chasing sales.Open →
• Survival, market share and other business objectivesSurvival as a start-up objective, market share and calculating it, cost efficiency, return on investment and calculating it, employee welfare, customer satisfaction, social objectives and social enterprises, and why objectives change as a firm grows.Open →
• Stakeholders and their objectivesStakeholders and the main groups, internal against external stakeholders, the objectives of shareholders, employees, customers, suppliers, local communities, government and banks, the stakeholder view against the shareholder view, managers as a separate group, stakeholder mapping, and unequal influence.Open →
• Stakeholder conflicts and corporate social responsibilityStakeholder conflict over wages, prices, supplier payment terms, moving production abroad, the local community and short-run profit against long-run investment, ways to reduce conflict, corporate social responsibility in practice, its effect on long-run profit, the shareholder criticism, greenwashing, and competitive pressure.Open →

What you need to know

Answer each one before you reveal it.

Take Scarcity, Choice and Potential Conflicts further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Trade-off vs Opportunity cost

  Trade-off: the balance struck between two competing options, where more of one can only be had by accepting less of the other. Opportunity cost: the value of the single best alternative given up when a choice is made.

• Free good vs Good supplied free of charge

  Free good: something so abundant that using it sacrifices nothing at all, such as air or sunlight. Good supplied free of charge: something handed to the buyer at no price, which nonetheless used up scarce resources to make.

• Profit maximisation vs Sales maximisation

  Profit maximisation: producing at the level of output where marginal cost equals marginal revenue, which is where the surplus over total costs is greatest. Sales maximisation: shifting the largest volume of output the firm can manage without making a loss, even though a smaller volume would earn more.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is meant by scarcity in economics?

   Model answer

   Scarcity is the condition in which wants are unlimited while the resources available to satisfy them are finite, so not everything that is wanted can be produced.

2. 2

   Why is scarcity described as the fundamental economic problem?

   Model answer

   Because every economy, however rich, has limited resources and must therefore decide what to produce, how to produce it and who receives it.

3. 3

   State the three questions every economy must answer because resources are scarce.

   Model answer

   Every economy must answer what to produce, how to produce it and for whom to produce it.

4. 4

   Distinguish between a want and a need.

   Model answer

   A need is something required for survival, such as food, water and shelter, while a want is anything desired beyond that which raises living standards.

5. 5

   Are economic resources the same thing as money?

   Model answer

   No, economic resources are the land, labour, capital and enterprise actually used to produce goods and services, whereas money is only a claim on them.

6. 6

   What is a free good, and give an example?

   Model answer

   A free good is one with no opportunity cost because it is not scarce, such as air or sunlight.

What is inside Levo

Six ways to work the same material.

Scarcity, Choice and Potential Conflicts revision questions

What does Scarcity, Choice and Potential Conflicts cover in Edexcel A-Level Economics B?

6 subtopics: scarcity and the economic problem, choice, trade-offs and opportunity cost, profit maximisation, sales maximisation and satisficing, survival, market share and other business objectives, stakeholders and their objectives and stakeholder conflicts and corporate social responsibility. Each one has its own page with questions and model answers.

How is Scarcity, Choice and Potential Conflicts organised?

By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.