Basic Concepts of Economics [Free JAMB Tutorial on Economics]

This Economics Tutorial will focus on the BASIC CONCEPTS OF ECONOMICS. This means we will explain the meaning of Wants, Scarcity, Choice, Scale of Preference, Opportunity Cost, and more. At the end of the tutorial, you can download it for FREE. Please share this page with your friends who may need it.

Welcome to the FREE Tutorial on the Basic Concepts of Economics. We will break down the meaning of Wants, Scarcity, Choice, Scale of Preference, Opportunity Cost, Rationality, Production, Distribution, and Consumption.

We will also show you the Economic problems of what, how, and for whom to produce and the efficiency of resource use.

After the tutorial, we will give you practice questions to help test your level of understanding of the topic.

Then we will provide the tutorial for you to download for FREE as a PDF document.

That’s awesome, right?

Now, just do us a favor, after reading this tutorial, please share this page with your friends who might find it helpful.

Wants

Wants refer to the human desires or wishes for goods and services. These can be anything from basic needs like food, shelter, and clothing to more luxurious items like a new car or the latest smartphone.

In economics, wants are essentially unlimited, as there is no end to the variety of things that people may desire.

Scarcity

Scarcity is a fundamental economic concept that arises from the basic condition of having unlimited wants in a world of limited resources. It occurs when the available resources (such as time, money, labor, and raw materials) are insufficient to satisfy all the wants and needs of a society. Scarcity forces individuals, businesses, and governments to make choices about how to allocate resources efficiently.

Didn’t get that???

Let’s explain it differently.

Imagine you have a box of your favorite biscuits. Now, let’s pretend those biscuits are really, really special, and you only have a limited number of them in the box. That means there’s not an endless supply of biscuits.

Scarcity in economics is kind of like that. It’s when there isn’t enough of something for everyone to have as much as they want. So, just like you might not have enough biscuits for all your friends, in the world of economics, things like toys, candy, or even time and resources can be scarce.

Because these things are limited, people have to make choices about how to use them. If you share your biscuits with your friends, you might not have as many for yourself. In the same way, in economics, people have to decide how to use their time or money because they can’t have everything they want.

So, scarcity is like a reminder that we can’t have everything we desire, and we need to make choices about how to use limited things.

Choice

Choice is the act of selecting among alternatives. In the context of economics, individuals and societies must make choices due to the scarcity of resources.

Making choices involves considering trade-offs — when you choose one thing, you are giving up the opportunity to use those resources for something else.

So choice is about making decisions when you can’t have everything you want. Imagine you have some money, and you go to the store. There are so many things you might like—toys, sweets, games, and more. But because you can’t buy everything, you have to decide what you want the most.

Rational decision-making involves evaluating the benefits and costs of different options and choosing the one that maximizes utility or satisfaction.

Scale of Preference

Imagine you have a list of things you really want to do on a weekend—play video games, ride your bike, eat ice cream, and visit the park. But, guess what? You can’t do everything at the same time because there’s limited time in a day.

The scale of preference is like making a list of your favorite activities in the order you want to do them. So, maybe you decide that playing video games is the most important thing for you, then riding your bike, eating ice cream, and visiting the park last.

It’s like saying, “If I can’t do everything, what do I want to do first, second, and so on?” This way, you have a plan for how to use your time based on what you like the most.

Textbooks say:

• The scale of preference is a list of a person’s wants or needs arranged in order of priority or importance.
• It reflects the fact that individuals have preferences and make choices based on their subjective valuation of different goods and services.
• People allocate their resources to satisfy their most urgent wants first and then move down the scale as additional resources become available.

THINK & ACT : If we can give you this for FREE, imagine what we can give if you pay and join the ALLSCHOOL JAMB Online Lesson. In the lesson, our hardworking tutors ensure they only teach you things that will come out in JAMB, so you’ll score extremely high in JAMB. Click Here to join the ALLSCHOOL JAMB Online Lesson NOW.

Opportunity Cost

Imagine you have some money and you decide to buy a new video game. Now, the money you spent on the video game could have been used for something else, like buying a new toy or going to a movie.

Opportunity cost is like thinking about what you give up when you make a choice. In this case, when you choose to buy the video game, the opportunity cost is the toy or the movie that you could have had instead.

So, opportunity cost is about the value of the next best thing you could have done or bought but didn’t because you made a particular choice. It’s a way of looking at what you’re giving up when you decide to do one thing instead of another.

In economics, people often consider opportunity cost when making decisions about how to use their resources—whether it’s money, time, or something else. It helps them understand that every choice comes with a trade-off.

Rationality

Imagine you have a big box of sweets, and you really, really like sweets. You also know that your friends like sweets too. Now, being rational means making choices that make sense and trying to get the most satisfaction or happiness out of those choices.

So, let’s say you have to decide how many sweets to share with your friends and how many to keep for yourself. Being rational means you think about it and decide on a fair way to share so that everyone is happy, including you. You wouldn’t want to keep all the sweets for yourself because that might make your friends sad, and you like your friends to be happy too.

In economics, when we talk about rationality, we mean that people try to make choices that make sense based on what they want and the information they have. They aim to get the most value or satisfaction from their decisions. It’s like using your thinking cap to make smart choices that make both you and others happy.

Textbooks say:

• Rationality in economics assumes that individuals and firms make decisions that maximize their own self-interest, given the information and constraints they face.
• It implies that economic agents weigh the costs and benefits of different choices and make decisions that lead to the highest level of satisfaction or profit.

Production

Imagine you love building things with colorful blocks. You have red, blue, and yellow blocks, and you want to make a cool tower. Now, making that tower is like production.

In economics, production is all about making things that people want or need. Just like you use your blocks to create something fun, companies and people use resources like materials, machines, and labor to make things we use every day, like toys, clothes, or even the yummy snacks you enjoy.

So, when we talk about production, it’s like the process of creating stuff that is useful or enjoyable for people. It involves putting together different resources to make things that make our lives better and more interesting. Just like building a tower with your blocks, but on a bigger scale!

This is how some textbooks put it:

• Production involves the process of transforming inputs (such as labor, capital, and raw materials) into outputs (goods and services) that are intended for consumption or use.
• The goal of production is to create value and satisfy human wants and needs. The efficiency of production is a key factor in determining the overall wealth and well-being of a society.

Distribution

Distribution in economics refers to the way in which the output of goods and services is allocated among individuals, households, and firms in an economy. It includes the distribution of income and wealth, which can be influenced by factors such as wages, profits, taxes, and government policies.

If you didn’t get that, imagine you have a bag of sweets, and you want to share it with your friends.

Distribution is like deciding how to share those sweets fairly. You wouldn’t want one friend to have all the sweets while the others have none, right?

In economics, distribution is about how goods and services (like sweets, toys, or even movies) are shared or spread out among people. There are different ways things can be distributed. For example, some people buy things with money, some might get things based on their needs, and sometimes, things are shared equally among a group.

So, when we talk about distribution, it’s like figuring out who gets what and how much. It’s all about making sure things are shared in a fair and organized way, so everyone can have a chance to enjoy or use them.

THINK & ACT : If we can give you this for FREE, imagine what we can give if you pay and join the ALLSCHOOL JAMB Online Lesson. In the lesson, our hardworking tutors ensure they only teach you things that will come out in JAMB, so you’ll score extremely high in JAMB. Click Here to join the ALLSCHOOL JAMB Online Lesson NOW.

Consumption

Consumption is the use of goods and services by households and individuals to satisfy their wants and needs.

It is one of the final stages in the economic process, where individuals acquire and use products for personal satisfaction. Consumer choices are influenced by factors such as preferences, income, prices, and cultural influences.

Economic Problems Of What, How, Whom

The economic problems of what, how, and for whom to produce, as well as the efficiency of resource use, are fundamental issues that societies face in the process of allocating their limited resources. Let’s break down each of these economic problems:

1. What to Produce:
   • This refers to the decision-making process about the types and quantity of goods and services that should be produced in an economy. It involves choices about the mix of products that will be most beneficial for society.
   • The challenge is to determine what goods and services will best satisfy the wants and needs of the population, given the available resources and technology.
2. How to Produce:
   • This problem involves deciding on the methods and techniques of production. It considers the combination of labor, capital, and technology to produce goods and services efficiently.
   • The goal is to find the most cost-effective and productive ways of transforming inputs into outputs, taking into account factors such as technology, labor skills, and available resources.
3. For Whom to Produce:
   • This question revolves around the distribution of goods and services among the members of society. It involves decisions about how the benefits of production are distributed among different income groups and individuals.
   • The challenge is to determine the distribution of income and wealth, addressing issues of equity and social justice. This can be influenced by factors like wages, taxes, and government policies.
4. Efficiency of Resource Use:
   • Efficiency in resource use is a concern for economic systems to operate optimally, ensuring that resources are not wasted and are utilized to their fullest potential.
   • Allocative efficiency involves producing the right mix of goods that maximizes overall societal satisfaction, while productive efficiency involves producing goods at the lowest possible cost.

Addressing these economic problems requires effective decision-making mechanisms, such as market systems, central planning, or a combination of both.

Market economies rely on the forces of supply and demand to guide resource allocation, while centrally planned economies involve government control over production and distribution. Striking a balance between these economic problems is crucial for achieving economic welfare and sustainability.

Now that’s all we’ll cover in this tutorial. It’s question time. Let’s see how well you understood what have been taught.

Practice Questions

1. What is the opportunity cost of a decision?
a) The explicit cost
b) The implicit cost
c) The average cost
d) The marginal cost

2. In a scale of preference, if option A is ranked higher than option B, what does it indicate?
a) Option A is more expensive
b) Option A is more important or preferred
c) Option B is more abundant
d) Option B is less scarce

3. What does productive efficiency in production imply?
a) Producing at the lowest cost
b) Producing the maximum quantity
c) Producing the most expensive goods
d) Producing the highest quality goods

4. Scarcity arises because:
a) Resources are unlimited
b) Wants are unlimited
c) Prices are too high
d) Governments regulate production

5. The question of “For Whom to Produce” is concerned with:
a) Allocating resources efficiently
b) Deciding who gets to consume goods and services
c) Determining the best production techniques
d) Assessing opportunity costs

6. Economic rationality assumes individuals:
a) Always make decisions based on emotions
b) Maximize their own self-interest
c) Are indifferent to costs and benefits
d) Prefer long-term costs over short-term benefits

7. The problem of “How to Produce” involves decisions about:
a) What goods and services to produce
b) The distribution of goods among individuals
c) The methods and techniques of production
d) Allocating resources efficiently

8. Consumption refers to:
a) The production of goods and services
b) The use of goods and services by households
c) The distribution of income
d) Allocating resources among competing wants

9. In a market economy, resource allocation is primarily determined by:
a) Central planning by the government
b) Consumer demand and producer supply
c) Random chance
d) Historical factors

10. What does the concept of distribution in economics focus on?
a) Allocating resources efficiently
b) The ways goods and services are produced
c) The income and wealth distribution among individuals
d) Determining opportunity costs

11. Wants in economics are:
a) Limited and essential
b) Unlimited and essential
c) Limited and optional
d) Unlimited and optional

12. Rational decision-making involves:
a) Ignoring costs and benefits
b) Maximizing self-interest
c) Randomly selecting options
d) Minimizing utility

THINK & ACT : If we can give you this for FREE, imagine what we can give if you pay and join the ALLSCHOOL JAMB Online Lesson. In the lesson, our hardworking tutors ensure they only teach you things that will come out in JAMB, so you’ll score extremely high in JAMB. Click Here to join the ALLSCHOOL JAMB Online Lesson NOW.

Answers And Explanations

IMPORTANT: Make sure you answer the questions before checking the answers.

1. What is the opportunity cost of a decision?
   • Answer: b) The implicit cost
   • Explanation: Opportunity cost includes both explicit (monetary) costs and implicit (non-monetary) costs. The implicit cost represents the value of the next best alternative forgone.
2. In a scale of preference, if option A is ranked higher than option B, what does it indicate?
   • Answer: b) Option A is more important or preferred
   • Explanation: In a scale of preference, a higher ranking indicates a higher level of importance or preference.
3. What does productive efficiency in production imply?
   • Answer: a) Producing at the lowest cost
   • Explanation: Productive efficiency is achieved when goods are produced at the lowest possible cost, minimizing waste and maximizing output.
4. Scarcity arises because:
   • Answer: b) Wants are unlimited
   • Explanation: Scarcity arises because human wants and desires are virtually unlimited, while resources are limited.
5. The question of “For Whom to Produce” is concerned with:
   • Answer: b) Deciding who gets to consume goods and services
   • Explanation: This economic problem is concerned with the distribution of goods and services among individuals in a society.
6. Economic rationality assumes individuals:
   • Answer: b) Maximize their own self-interest
   • Explanation: Economic rationality assumes that individuals make decisions to maximize their own well-being or satisfaction.
7. The problem of “How to Produce” involves decisions about:
   • Answer: c) The methods and techniques of production
   • Explanation: This economic problem involves decisions about the most efficient ways to transform inputs into goods and services.
8. Consumption refers to:
   • Answer: b) The use of goods and services by households
   • Explanation: Consumption is the final stage in the economic process, involving the utilization of goods and services by individuals and households.
9. In a market economy, resource allocation is primarily determined by:
   • Answer: b) Consumer demand and producer supply
   • Explanation: In market economies, the forces of supply and demand determine resource allocation.
10. What does the concept of distribution in economics focus on?
    • Answer: c) The income and wealth distribution among individuals
    • Explanation: The economic problem of distribution is concerned with how the benefits of production are shared among members of society.
11. Wants in economics are:
    • Answer: b) Unlimited and essential
    • Explanation: Wants in economics are considered unlimited, and they can include both essential and non-essential desires.
12. Rational decision-making involves:
    • Answer: b) Maximizing self-interest
    • Explanation: Rational decision-making involves choosing options that maximize individual satisfaction or utility.

So how many did you get? Share it with us in the comment section below.

Download this Economics Tutorial for Free

Recommended Articles for JAMBites

• Join Allschool JAMB Lesson and Score Very High in JAMB [Tested & Trusted]
• Practice Real JAMB Past Questions with ALLSCHOOL JAMB CBT App
• Install LitTexts App: 2025 Literature Prose, Drama, & Poetry at your fingertips.
• How to Score Extremely High In JAMB [7 Trusted Tips]
• JAMB Free Tutorials [💯 Free]
• All JAMB News and Updates
• Download JAMB Novel – The Lekki Headmaster [Free PDF]
• Likely Questions And Answers From The Life Changer
• When is the JAMB Exam Starting?
• JAMB Runs is FAKE
• Idioms You Might See in Your English JAMB Questions [Hurry, Check Them Out!]
• JAMB Syllabus for All Subjects [Official & Updated]
• Updated Accredited JAMB CBT Centers in Nigeria.
• How to Register for JAMB In Just 3 Steps [Everything you need to know]
• How Much Is JAMB Form 2025
• Solutions to Profile Code Issues [Get Yours Fixed Instantly]
• How to Fill JAMB Form the Right Way [Avoid Silly Mistakes]
• JAMB Brochure: JAMB Subject Combination for all Courses

ALLSCHOOL TEAM