Economics begins with a simple but powerful fact: people have unlimited wants, yet the resources to satisfy them are limited. This gap is called the basic economic problem.
Unlimited wants, limited resources
Wants are the goods and services people would like to have — effectively unlimited: satisfy one want and another appears. Resources (land, labour, capital and enterprise) are limited, so we say resources are scarce. Scarcity means we cannot have everything, so we must choose — a pupil with two hours of free time might revise maths or help at home, but not both fully.
Opportunity cost
The opportunity cost of a decision is the next best alternative given up — not the money spent, but the best thing you sacrifice. If Aisha spends £10 on a book, the opportunity cost is the notebook she could have bought instead.
Free goods versus economic goods
An economic good is scarce and has an opportunity cost, such as bread or a bicycle. A free good has no opportunity cost because it is not scarce; sunlight is a common textbook example. This is why economists say there is 'no such thing as a free lunch': even a gift used resources that had another possible use, so a real cost was paid by someone.
Key idea: scarcity is the reason choices must be made, and opportunity cost measures what each choice truly costs.