1. By the end of studying this Section, you will understand . .
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What is meant by the economic problem
The nature of factors of production
The concept of opportunity cost
The model of the PPF
The concepts of Productive Efficiency and Growth
What is meant by a market economy
What is meant by a centrally planned economy
What is a mixed economy
The features of different resource allocation systems
What is meant by a market
What is meant by specialisation

2. What is Economics really about?
A Case Study – The National Health Service
Why do we have one? Not all other countries do?

3. The Economic Problem
In context
NICE
Listen to the clip
and then write
down what you
think the
‘PROBLEM’ is
that the work of
NICE aims to
help solve.

4. The Basic Economic Problem
is that of...............‘ECONOMIC SCARCITY’
 Resources are LIMITED
 ‘Wants’ are UNLIMITED
 therefore CHOICES have to be made.
This IS....... ‘THE ECONOMIC PROBLEM’

5. Should healthcare be rationed?
In pairs discuss...
How would you decide how to
allocate resources?
What sort of characteristics do you
think might warrant the exclusion
of people from benefitting from free
healthcare?
Get ready to outline your thoughts to the class.

6. Theory and Context
In Economics you need to learn to apply theory to context
The ‘Drug rationing’ article is an example of economic
scarcity....
So, from the article, in the context of health and drugs
rationing...
1. Identify two resources that are limited/finite....
2. Identify two wants that are unlimited/infinite....
3. Write a sentence that describes a specific choice that
is suggested will need to be made as a result....

7. One example of the economic problem is the case of
the NHS and NICE, where there is a finite pot of money
and resources such as medical equipment, doctors, and
hospital beds etc and they need to try and satisfy
increasing and, what appears to be, unlimited demands
for treatments/drugs and other health services.
As a result, they have to make very difficult decisions
between one use for the resources and another e.g. if
money is spent on cancer care drugs then it cannot be
spent on psychiatric services or cystic fibrosis sufferers.

8. Your Task:
Using the vocabulary of the ‘economic problem’, prepare no
more than three sentences to describe the issue of why the
Olympic Stadium is an economic problem.
Ensure that you make a point and support it with evidence from
the case...

9. One example of the economic problem is the case of
funding the Olympic games in 2012, where there is a
finite pot of money and resources, Tessa Jowell has set
the budget for the games at £9.325m and they need to
try and satisfy increasing and, what appears to be,
unlimited demands for facilities, security, and
construction contracts.
As a result, they have to make very difficult decisions
between one use for the resources and another e.g. if
more money is spent on facilities then it cannot be
spent on the Athletes village or increased security costs.

10. Government Spending Cuts?
Another example of the economic
problem...

11. Opportunity Cost is the
cost of any decision
measured in terms
of the next-best
alternative that has
had to be sacrificed
or forgone in the
making of the
decision.