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Class 9 Building Blocks in Economics: The Problem of Choice: cheat sheet
CBSE Social Science. Scarcity and choice, opportunity cost, the Production Possibility Curve, the three central questions, and planned, market and mixed economies.
Key ideas
- Wants are unlimited but resources are limited, so every person, firm and country must choose (scarcity).
- The opportunity cost of a choice is the value of the next best option given up.
- Every economy must decide what to produce, how to produce it and for whom.
- A Production Possibility Curve shows the combinations of two goods that can be made with all resources used efficiently: more of one means less of the other.
- Production can be labour-intensive (more workers, as in handicrafts) or capital-intensive (more machines, as in steel).
- In a planned economy a central authority decides; in a market economy prices and private owners decide; a mixed economy, like India’s, has both.
- Public goods like roads, parks and street lights are open to all, so governments usually provide them.
Remember
| Economics | from the Greek “oikonomia”, household management |
| Opportunity cost | the value of the next best option given up |
| Three central questions | what to produce? how? for whom? |
| Factors of production (in the book) | land, labour, capital, technology |
| Savings | income − spending on essentials − spending on non-essentials |
| India’s reforms | 1991: more room for markets, with a role kept for government |
Watch out
- Counting every option given up as the opportunity cost: it is only the next best one.
- Confusing needs (food, water, shelter) with wants (gadgets, holidays).
- Thinking a market economy has no government at all: almost every economy is mixed.
Worked example
A family earns ₹27,000 a month. It spends 49% on essentials and 18% on non-essentials, and saves the rest. How much does it save, and what is one opportunity cost of saving?
Working: 33% of 27,000
Answer: ₹8,910; the things it could have bought now with that money.
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