Syllabus: Cambridge - IGCSE Economics
Module: 2.2 The Role of Markets in Allocating Resources
Lesson: 2.2.2 Key Resources Allocation Decisions

Introduction

How do societies decide what to produce, how to produce it, and for whom? These three questions sit at the heart of Cambridge IGCSE Economics 2.2.2 — and they offer powerful context for understanding how market systems work in real life. This section aligns with the Cambridge IGCSE Economics syllabus (0455), helping students link theory to the everyday decisions that shape economies.

Key Concepts

In this part of the syllabus, students are expected to understand:

• The three key economic questions: What to produce, how to produce, and for whom to produce

• The role of opportunity cost and trade-offs in these decisions

• How these decisions are made in a market economy, including the influence of price signals and profit motives

• Differences in resource allocation in mixed, planned, and market economies

• How government intervention can influence resource allocation

The emphasis is on how these abstract ideas are practically applied within different economic systems.

Real-World Relevance

During the COVID-19 pandemic, governments worldwide had to make urgent decisions about resource allocation — for instance, whether to invest in ventilators, vaccines, or public transport. These choices mirrored the three key economic questions in real time.

In the UK, debates over HS2 (a high-speed railway) or NHS funding regularly demonstrate trade-offs between types of public spending. In market economies, tech companies like Apple constantly respond to price signals, shifting production or redesigning supply chains based on consumer demand and profit potential.

Such examples allow learners to see the dynamic application of theory in current affairs and business strategy.

How It’s Assessed

According to the Cambridge IGCSE assessment model:

• Paper 1 (Multiple Choice) may include scenario-based questions requiring identification of correct allocation principles

• Paper 2 (Structured Questions) typically presents real or hypothetical economic contexts, asking candidates to analyse resource allocation choices using appropriate terminology

Common command words include:

• Define – students explain key terms like “opportunity cost” or “profit motive”

• Explain – demonstrating understanding through examples or cause-and-effect

• Discuss/Evaluate – encouraging deeper thinking around different allocation methods, including pros, cons, and contexts

Effective teaching prepares students to structure longer answers using PEE (Point, Evidence, Explanation), integrating diagrams where appropriate.

Enterprise Skills Integration

This topic naturally lends itself to enterprise education. Students can:

• Explore how entrepreneurs decide what products to launch and how to allocate limited budgets

• Develop critical thinking around production methods, such as ethical sourcing or automation

• Engage in simulations where they role-play as business owners, choosing between competing priorities

• Apply opportunity cost thinking in budgeting and decision-making tasks

These activities reinforce key employability skills like resource management, strategic thinking, and adaptability.

Careers Links

Understanding resource allocation builds strong foundations for roles in:

• Business management – including operations and logistics

• Public policy and government – such as roles in the Treasury or local planning

• Entrepreneurship – where decision-making on production and pricing is central

• Data analysis – especially in roles assessing demand and supply trends

This supports Gatsby Benchmark 4 (Linking curriculum learning to careers), giving students real insight into how economics is applied beyond the classroom.

Teaching Notes

To deepen understanding:

• Use current events (e.g., fuel shortages, NHS spending) to spark classroom discussion

• Run a classroom market simulation where students allocate fictional resources across sectors

• Highlight misconceptions — for example, that “market economies” do not involve any government intervention

• Extend high-ability learners with comparative analysis of two different economies’ approaches to a crisis

• Use formative assessment techniques like hinge questions to check for conceptual clarity

Encourage students to explore economic decisions from multiple viewpoints — consumer, producer, and policymaker — to build empathy and analytical depth.