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Making Choices

See how every choice means giving something else up.

  • Define and explain Making Choices in your own words
  • Use key terms such as scarcity accurately
  • Apply what you have learned to new examples and questions
  • Avoid the common mistakes learners make with this topic

This lesson focuses on Making Choices: see how every choice means giving something else up.

Definition: Making Choices

See how every choice means giving something else up.

Key ideas

Every choice has a cost

Because resources are scarce, every choice involves giving something up. If you spend your £5 on a book, you cannot also spend it on sweets. The thing you give up is called the opportunity cost, and thinking about it helps you choose wisely.

The basic economic problem

People have unlimited wants but limited resources. Even the richest person cannot have everything, because time, money and raw materials are all limited. This mismatch between wants and resources is called scarcity, and it is the starting point of all economics.

Key term — scarcity: The basic economic problem: there are not enough resources — money, time, materials — to satisfy everyone's wants, so choices must always be made.

Worked example: Making Choices

Name one scarce resource other than money.

Time — there are only 24 hours in a day, so how you spend it always involves choices.

Answer: Time — there are only 24 hours in a day, so how you spend it always involves choices.

Common mistakes
  • Forgetting that saving is also a choice Money saved is not money lost — it stays available for future needs and wants.
  • Thinking wants are needs A games console is a want, not a need — you can live without it, even if everyone else has one.

Practice

Why do economists say wants are unlimited?
Think about what happens when you get something new.

Because as soon as one want is satisfied, new ones appear — there is always something else people would like.

Tom saves £2 of his £5 pocket money each week. Give one reason saving is sensible.
Think about the future.

Saved money is available later for bigger needs or unexpected costs — it buys future choices.

Which of these is a need: a warm coat, a video game, or a sticker album?
Think about what you must have to stay healthy.

A warm coat — it protects you from the cold; the others are wants.

Sara has £8. A book costs £5 and ice cream costs £4. Can she buy both?
Add the two prices together.

No — together they cost £9, which is more than £8. Scarcity means she must choose.

Quick check

Making Choices — quick check

Which of these best defines "scarcity"?

The basic economic problem: there are not enough resources — money, time, materials — to satisfy everyone's wants, so choices must always be made.

If Sara buys the book, what is her opportunity cost?

The ice cream — it is the next-best thing she gives up by choosing the book.
Key takeaways
  • Making Choices: see how every choice means giving something else up.
  • Every choice has a cost: Because resources are scarce, every choice involves giving something up.
  • need: Something you must have to live a healthy life, such as food, water, shelter and clothing.
  • Watch out for: forgetting that saving is also a choice
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