Syllabus: Pearson - AS Level Economics
Module: 1.1 Nature of Economics
Lesson: 1.1.3 The Economic Problem

Introduction

This section of the Pearson Edexcel AS Level Economics A syllabus introduces one of the most fundamental challenges in economics: the economic problem. Found in Theme 1.1.3, it centres on scarcity, choice, and the allocation of finite resources. Teachers are expected to guide students through the reasoning behind economic decisions and the implications for consumers, producers, and governments. As with the rest of Theme 1, the emphasis here is on building economic thinking that prepares students to evaluate real-world situations critically and construct informed responses.

Key Concepts

According to the Pearson Edexcel specification, students need to understand:

• Scarcity: The universal problem of unlimited wants and finite resources.

• Opportunity cost: What is foregone when a choice is made, and why it’s central to decision-making.

• Renewable vs non-renewable resources: Their definitions and roles in long-term sustainability.

• Economic agents: How consumers, producers and governments face choices and trade-offs.

• Production Possibility Frontiers (PPFs): How to use them to visualise trade-offs, efficiency, growth, and resource allocation.

• Positive vs normative economics: Understanding how value judgments influence policy decisions.

Real-World Relevance

The economic problem isn’t just academic—it’s behind many of today’s most pressing issues. For instance:

• Climate change policy: Governments must decide how to allocate funding between green infrastructure and other public services.

• Cost-of-living decisions: Individuals juggle rent, food, and transport, constantly making trade-offs.

• Healthcare allocation: NHS trusts often face difficult choices about which treatments to fund when budgets are limited.

Mini case: During the pandemic, governments had to choose between investing in public health versus sustaining economic activity—classic opportunity cost with life-and-death stakes.

How It’s Assessed

In Pearson Edexcel AS Level Economics A, Theme 1 is assessed in Paper 1, which focuses on microeconomics. Question types include:

• Data response questions using contemporary economic contexts.

• Short-answer and extended-response questions to test understanding of concepts like PPFs and opportunity cost.

• Application and analysis questions where students must apply theory to unfamiliar real-world scenarios.

Expect command words such as:

• Explain – justify or describe economic choices or diagrams

• Analyse – show logical reasoning behind trade-offs or effects

• Evaluate – consider both sides and make a judgement (e.g. “Evaluate the importance of opportunity cost for a government choosing between healthcare and education spending”)

Enterprise Skills Integration

This topic is ideal for building:

• Problem-solving: Students must weigh up competing uses of limited resources.

• Decision-making: Identifying trade-offs and making justified choices mirrors what entrepreneurs and policymakers do.

• Critical thinking: PPF analysis demands students consider not only what is, but what could be, if resource allocation changed.

Using classroom simulations (e.g. students run fictional governments deciding on spending priorities) can bring these skills to life and reflect the “learn by doing” principle at the core of the Enterprise Skills approach.

Careers Links

Understanding scarcity and trade-offs is foundational for careers in:

• Economics and policy: Analysts must assess how best to allocate scarce public resources.

• Business management: Entrepreneurs constantly navigate opportunity costs when allocating capital.

• Environmental planning: Sustainability officers evaluate trade-offs between economic growth and environmental protection.

This lesson supports Gatsby Benchmark 4 (Linking curriculum learning to careers) and Gatsby Benchmark 5 (Encounters with employers), especially if paired with guest speakers from government or finance sectors.

Teaching Notes

Practical tips:

• Start with relatable choices: phone upgrade vs saving for a holiday.

• Use simple PPC diagrams early, gradually increasing complexity.

• Challenge students to justify opportunity costs in both personal and national contexts.

Common pitfalls:

• Students often confuse opportunity cost with monetary cost.

• Some struggle to interpret PPC diagrams dynamically (e.g. shifts vs movements).

Extension ideas:

• Ask students to analyse newspaper articles for implicit opportunity costs.

• Have students create their own “government budgets” under resource constraints and defend their choices in a debate.