OxfordAQA International A Level Economics
OxfordAQA International A Level Economics 3.1.1 The Economic Problem and Methodology Exam Questions
Free OxfordAQA International A Level Economics revision for 3.1.1 The Economic Problem and Methodology: what you need to know, common mistakes and exam-style questions with answers. Covers economic activity, factors of production, scarcity and choice, opportunity cost, production possibility diagrams and positive and normative statements.
Practise 3.1.1 The Economic Problem and Methodology with past papers
Once you have learnt this topic, find the 3.1.1 The Economic Problem and Methodology questions in real OxfordAQA International A Level Economics past papers and mark them with the mark scheme. Doing lots of real questions is the quickest way to learn how examiners ask about each idea.
About OxfordAQA International A Level Economics 3.1.1 The Economic Problem and Methodology
The economic problem and methodology is the starting point of the OxfordAQA International AS course and sits in Unit 1, The operation of markets, market failure and the role of government. It introduces the purpose of economic activity, the four factors of production, and the central problem of scarcity, which forces choices and creates opportunity cost. Production possibility diagrams are used to show these ideas and to illustrate economic growth. You also learn the difference between positive and normative statements. Examiners often ask you to draw or interpret a production possibility diagram, identify opportunity cost from data and classify statements as positive or normative.
What you need to know
- 3.1.1.1 Economic activity The purpose of economic activity is to produce goods and services to satisfy needs and wants. Economic activity answers what to produce, how to produce it and for whom.
- 3.1.1.2 Economic resources The factors of production are land, labour, capital and enterprise. Their rewards are rent, wages, interest and profit. Renewable resources can be replaced; non-renewable resources cannot.
- 3.1.1.3 Scarcity and choice Wants are unlimited but resources are finite, so choices must be made. Opportunity cost is the value of the next best alternative given up.
- 3.1.1.4 Production possibility diagrams A PPD shows the maximum combinations of two goods an economy can produce with its resources. Points inside show unemployed or inefficiently used resources; points outside are unattainable. Movement along the curve shows opportunity cost; an outward shift shows long-run economic growth.
- 3.1.1.5 Methodology Economics uses models built on assumptions and tests them against evidence. Positive statements can be tested by facts; normative statements contain value judgements about what ought to happen.
Common mistakes in 3.1.1 The Economic Problem and Methodology
- Defining opportunity cost as the money price of a good. It is the next best alternative forgone.
- Treating money as a factor of production. Capital means man-made goods used in production, such as machinery.
- Saying a point inside the PPD is impossible. It is attainable but shows under-used or inefficiently used resources.
- Labelling a statement normative just because it contains a number. A statement is normative only if it contains a value judgement, such as should or ought.
- Shifting the whole PPD outward for an improvement that affects only one good. That causes a pivot along one axis.
Try three 3.1.1 The Economic Problem and Methodology exam-style questions
1. Explain what is meant by opportunity cost, using an example. (3 marks)
Show the mark scheme answer
Opportunity cost is the value of the next best alternative forgone when a choice is made; because resources are scarce, choosing one option means giving up another; e.g. a government spending on roads gives up the hospitals it could have built.
2. Distinguish between a positive and a normative economic statement, giving an example of each. (4 marks)
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A positive statement is objective and can be tested against evidence; e.g. unemployment rose last year; a normative statement contains a value judgement and cannot be proved true or false; e.g. the government should cut income tax.
3. Using a production possibility diagram, explain how an increase in investment in capital goods can lead to economic growth. (4 marks)
Show the mark scheme answer
Producing more capital goods means fewer consumer goods now, a movement along the PPD (opportunity cost); the extra capital increases productive capacity in future; this shifts the PPD outwards; showing long-run economic growth.
3.1.1 The Economic Problem and Methodology FAQs
What does OxfordAQA International A Level Economics 3.1.1 The Economic Problem and Methodology cover?
It covers the purpose of economic activity, factors of production, scarcity, choice and opportunity cost, production possibility diagrams and economic methodology.
Which unit is 3.1.1 The Economic Problem and Methodology examined in?
It is examined in Unit 1 (EC01), The operation of markets, market failure and the role of government, an International AS unit with multiple choice and data response questions. Units 3 and 4 are synoptic, so the ideas can also be used there.
How do I use production possibility diagrams well?
Label both axes with the goods, draw a concave curve to show increasing opportunity cost, and mark the relevant points clearly. Always explain what a movement along, a point inside or a shift of the curve means in words.
