IB Economics: Introduction to Economics Revision

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What does economic scarcity mean?

Introduction to Economics is a core part of IB Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.

Key concepts

ScarcityResources are limited relative to unlimited human wants, so every individual, firm and society must make choices.

Factors of productionLand, labour, capital and entrepreneurship, whose rewards are rent, wages, interest and profit.

Opportunity costThe value of the next best alternative given up when a choice is made.

Free and economic goodsEconomic goods use scarce resources and have an opportunity cost; free goods are unlimited, so their opportunity cost is zero.

Production possibilities curveShows the maximum combinations of two goods an economy can produce with full, efficient use of its resources and given technology.

Shifts of the PPCMore or better resources or technology shift the PPC outwards; points inside it show unemployed or inefficiently used resources.

Economic systemsFree market, planned and mixed economies decide what, how and for whom to produce through prices, the state, or a combination.

The price mechanismIn markets, prices signal scarcity, ration goods and create incentives, allocating resources without central direction.

Circular flow of incomeA model of income and spending flowing between households and firms, with leakages (saving, taxes, imports) and injections (investment, government spending, exports).

Positive and normative economicsPositive statements can be tested against evidence; normative statements contain value judgements about what ought to be.

Learn Introduction to Economics 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:

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Common mistakes to avoid

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.

Practise Introduction to Economics — free games

Test yourself with these quick revision games for this topic:

▶ Two Truths, One Lie ▶ Reveal Race ▶ Connections Grid ▶ Falling Words ▶ Word Web

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Introduction to Economics

Key concepts

Common mistakes to avoid

Practise Introduction to Economics — free games

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