A-Level Economics - Key Terms

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Scarcity

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The fundamental economic problem where unlimited human wants exceed the limited resources available to satisfy them. Scarcity forces societies to make choices about resource allocation. Example: Land, labour, and capital are finite, but demand for goods and services is infinite.

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Opportunity Cost

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The value of the next best alternative foregone when making a choice. It represents the true cost of any decision. Example: If you study economics instead of working part-time, the opportunity cost is the wages you could have earned.

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Factors of Production

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The four resources used to produce goods and services: Land (natural resources), Labour (human effort), Capital (man-made tools), and Enterprise (risk-taking organization). Example: A bakery uses flour (land), bakers (labour), ovens (capital), and the owner (enterprise).

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Positive Statement

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An objective, fact-based statement that can be tested using evidence. It describes 'what is' without value judgments. Example: 'The unemployment rate is 5%' is positive because it can be verified with data.

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Normative Statement

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A subjective statement expressing an opinion about 'what ought to be.' It involves value judgments and cannot be tested factually. Example: 'The government should increase the minimum wage' reflects personal beliefs about fairness.