Economic Principles is a core part of A-Level Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
The basic economic problemWants are unlimited but resources are finite, so every society must decide what to produce, how to produce it and for whom.
ScarcityResources are limited relative to wants, so not every want can be satisfied and choices must be made.
Factors of productionThe resources used to produce goods and services: land, labour, capital and enterprise.
Opportunity costThe value of the next best alternative forgone when a choice is made.
Economic and free goodsEconomic goods are scarce and have an opportunity cost; free goods, such as air, are unlimited so have zero opportunity cost.
Production possibility frontierA curve showing the maximum combinations of two goods an economy can produce when all its resources are fully and efficiently used.
Points on, inside, beyondPoints on the PPF are productively efficient, points inside show unused or wasted resources, and points beyond are currently unattainable.
Increasing opportunity costA PPF is usually drawn bowed outwards (concave to the origin) because resources are not equally suited to both goods, so each extra unit costs more of the other; a straight-line PPF shows constant opportunity cost.
Shifts of the PPFMore or better resources or improved technology shift the PPF outwards (economic growth); a loss of resources shifts it inwards.
Positive and normative statementsPositive statements can be tested against evidence; normative statements are value judgements about what ought to happen.
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Learn Economic Principles step by step
Free interactive mini-lessons: short screens, worked examples and quick checks. Pick your exam board to open its course map, then tap L on this topic:
Questions where students often pick the tempting wrong answer — make sure you know the right one:
What does economic scarcity mean?✗ Simply that something is rare.✓ Unlimited wants exceed limited resources, forcing choices.
What is opportunity cost?✗ Only the money price of an item.✓ The next best alternative given up when you make a choice.
What is the difference between a shift in demand and a movement along the demand curve?✗ A change in price shifts the demand curve.✓ A movement along the curve is caused by a change in price; a shift of the whole curve is caused by changes in other factors (income, tastes, substitute prices).
Practise Economic Principles — free games
Test yourself with these quick revision games for this topic:
