Cambridge IGCSE · Economics (0455)
5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on The nature of the economic problem.
A group of hikers discovers a natural spring in a remote, uninhabited forest. The water flows in such abundance that every hiker can drink as much as they want without reducing the amount available to others. In this specific context, the spring water is classified as:
Which term refers to resources that are limited in supply and are used to produce goods and services?
A government has a fixed budget of \( \$200 \) million. It can choose to build either 4 new secondary schools or 5 miles of a new highway.
What is the opportunity cost to the government of building 1 mile of the highway?
What is the fundamental economic problem faced by all societies?
Which statement best describes the nature of the economic problem for a worker who has just received a significant pay increase?
What is the key difference between an economic good and a free good?
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Explain how the concept of opportunity cost influences a consumer's decision-making process when buying a new smartphone.
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Evaluate why the nature of the economic problem means that even a country with a large surplus of natural resources must still make choices regarding resource allocation.
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a) Define the term economic problem.
b) Explain what is meant by finite resources.
c) Give one example of a free good and explain why it is considered a free good.
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A government in a developing country is planning its annual budget. It has a fixed amount of revenue from taxes and aims to improve the living standards of its citizens. The two main areas being considered for increased spending are public healthcare and education.
a) Define the term unlimited wants and provide an example in the context of the government in this scenario.
b) Explain how the government's decision-making process, as described above, illustrates the concept of scarcity and choice.
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