CAMBRIDGE IGCSETM AND O LEVEL ECONOMICS:COURSEBOOK ANSWERSCoursebook answersChapter 1used to produce them.Workers tend toEconomics in contextproduce more each year,as they become1 Not everyone who wants a car has a car.more experienced and work with betterSome people lack the money to buy a car.machinery.Machines wear out withtime,but they are usually replaced.2In many towns and cities,there is notThe number of machines also tends toenough spare land to build more roadsincrease with time.In a number of places,it may be necessaryto change the use of land by demolishingC At any one time,there are only sohomes,for example.Student's own response.many resources while there is no limitto our wants.Over time,resources canEconomics in actionchange.They may increase due to,for instance,a rise in the number of1 The number of holidays abroad that peopleworkers resulting from a rise in worldcan take is limited by the income they havepopulation.They will,however,notand the time available they have.become sufficient to meet our wants,as wants will continue to increase and2The number of tourists that the Maldivesoutstrip resources.can host is restricted by space,the workersneeded to cater for their wants,the numberWorld population is likely to rise forof hotel rooms and other facilities availablesome time to come.Prices are also likelyIn addition.there is a limit to how manyto increase in the future,but such atourists a country can host without causingchange will reflect changes in demandand supply and will not be a cause ofscarcity.Activity 1.13BThe basic economic problem is thatwants exceed resources.What to produce:1,5,6;Who to produce for:2.3;How to produce it:4.DWind coming in from the sea does notrequire resources to produce.All theActivity 1.2other items have to be produced and,in each case,the production involves an1 free good-exists without resources beingopportunity cost.needed to produce it;2 economic good-needs5aThe basic economic problem is thatresources to produce,e.g.rubber;3 economicwe cannot have everything we want.good-needs resources to produce,e.g.The shortage arises because while therejournalists to produce a newspaper;4 economicare unlimited wants,there are finitegood-needs resources to produce,e.g.buildingsresources.to house books and computers;5 economicgood-needs resources to produce,e.g.teachersbA car is an economic good as it takesto teach (e.g.economics).Resources are used toresources to produce it.Among theproduce 2-5.resources that are used to produce carsare machines and workers.The numberPractice questionsof cars produced depends on thequantity and quality of resources that areScarcity arises because wants areused.These resources could be used togreater than the resources that can beproduce other goods and services.Cambridge IGCSETM and O Level Economics-GrantCAMBRIDGE IGCSETM AND O LEVEL ECONOMICS:COURSEBOOK ANSWERSChapter 2in output per worker.Worse working conditionswould reduce workers'motivation and may makeit more difficult for them to carry out their tasks.Economics in contextActivity 2.41An airline might experience a range of1 a 3 machines as 3 will wear out.difficulties,including increased competitionfrom rival airlines,increased fuel costs.b 4 machines to take capacity from 1200difficulty recruiting staff and increasedto1600.government regulations.c 7 machines in total -3 replacement and2Nguyen may also decide on,for example,the4 to expand capacity.fares to charge,how to advertise the airlineand whether to merge with another airline.2There may be advances in the technology.Activity 2.1Economics in actionCapital:1,2;Land:3;Labour:4;Enterprise:5.1AI is likely to increase both the quantityand quality of capital goods.It will enablemore and better-quality capital goods to beActivity 2.2produced.Student's own response.Example answer:2AI may result in some job losses if bettercapital goods can do some of the workFactor ofDefinitionExampleRewardPicturecurrently being done by workers.Alreadyproductionsome call centre workers have been replacedLandNaturalGoldRentPictureby automated call services.resourcesof gold.used inproduction.Activity 2.5LabourHumanBus driversWagesPictureeffortof a busStudent's own research.used indriver.production.CapitalArtificialAeroplanesPicturePractice questionsof anEnterprise is the ability and willingnessused inaero-to take risks and make productionproduction.plane.decisions.Capital,land and labour areEnterpriseRisk-takingA farmerProfitPictureused in production,but they do notand keyofhave making key business decisions anddecision-farmers.making intaking risks as their function.business.A Capital is an artificial good used toproduce other goods and services.ForActivity 2.3example,a road enables passengers totravel and freight to be transported.1 and 2 would raise labour productivity.B Net investment is total (gross)Improved education and training would makeinvestment minus depreciation.In thisworkers more skilful and therefore capable ofcase,it is 3 000-500.producing a higher output.Better equipmentshould also enable each worker to produce more.C Wages are paid to workers,who areOn the other hand,3 would probably cause a fallhuman,whereas rent is paid to landa natural resource.Cambridge IGCSETM and O Level Economics-GrantCambridge University Press Assessment 2025CAMBRIDGE IGCSETM AND O LEVEL ECONOMICS:COURSEBOOK ANSWERS5BA forest is land and this is lost.2It may have been a difficult choice.Both mayA factory is capital and building a newbring considerable benefits.There will havefactory will add to a country's stockbeen a number of influences on the decisionof capital.including how many jobs a new hospitalwould have created,whether existingaLand and capital.hospitals were overcrowded and the extent tobAn increase in the retirement age wouldwhich clean energy will,in the future,reduceincrease the quantity of labour.Morethe need for medical care.people would be in the labour forceif they have to work until the age of70 rather than 67,for example.TheEconomics in actionworking age range would be expanded.1 In deciding which A levels to study.studentsThere might also be an increase in thehave to consider which ones they will enjoy,number of people within the existingwhich ones they will do best in and whichworking age group.This could beones will be useful for the university degreebecause of a rise in the birth rate thatthey may wish to study and the career theyoccurred 16 or more years earlier,morewould like to pursue.There is only so muchpeople of working age are coming totime to study.Some people may be decidinglive in the country than working-agewhether to study A level Economics orpeople leaving to live in other countriesA level Accounts as their third A level.or a fall in the mortality (death)rate.If they select A level Economics,A levelAccounts is the opportunity cost.TakingThe quality of labour may increaseinto account opportunity cost makesover time due to better educationstudents weigh up the relative gains of theand appropriate training.If workerstwo or more choices.are better educated,they will gainmore qualifications and skills.MoreIn deciding who to take a penalty kick,aand better training can also increasefootball manager is likely to have ranked theworkers'skills,and a more skilledteam in terms of their likely success.Mostlabour force will be able to produceteams are likely to have a regular penaltytaker.They are also likely to have a'bestmore goods and services.They are alsomore likely to be able to do a greateralternative'penalty taker in case the firstvariety of tasks and more difficult tasks.choice player is injured.Over time,the health of workerstends to improve.This is for a varietyActivity 3.1of reasons including better medical1treatment and more awareness ofThe opportunity cost of producingthe importance of good nutrition.peshwari naan in 2023 was producingA healthier labour force is likely to bekeema naan.This is the opportunity costmore focused,more alert and will loseas a keema naan is the next most profitablenaan to produce.fewer working days due to illness.In 2025,the opportunity cost of producingpeshwari naan changed to producingChapter 3garlic naan.This is because garlic naanbecame the second most profitable naanto produce.Economics in context1 Agricultural output in Victoria is likelyto have fallen as there would be less landavailable to grow crops and raise livestock.Cambridge IGCSETM and O Level Economics-GrantCambridge University Press Assessment 2025