Did you notice that there were two types of PPC diagram used in yesterday’s post and the other in the question? If you have forgotten or did not pick up on it, the diagrams look like this. What are the similarities and differences between these two diagrams?
Diagrams are the lifeblood of economics. They are graphical representations of mathematical relationships between variables. A good diagram speaks a thousand words. It brings out the intuition behind complex models. And economic intuition is what you need to master in order to score at the A Levels (and at the university level too).
Now let’s back up a little and consider the problem of scarcity in greater detail.
Unlimited wants don’t go well with limited resources. We can’t have everything that we want. Society has to make choices, and sometimes, really tough ones.
“Economics is the study of choice made under scarcity.”
The study of economics revolves around scarcity. This is a big idea. In the past few days we have learnt about resources and wants. Scarcity is this idea that limited resources constrain unlimited wants. If we want something, we usually have to give up something else to get it. We all know this.