Extract 1: Willowbrook's land-use decision
Willowbrook Council owns one 18-hectare riverside site and has a capital budget of £14 million. Residents want more affordable housing, better protection from flooding and more public green space. The available land and budget are not sufficient to provide both of the plans being considered.
Under the housing scheme, a private construction firm would use prefabricated panels. Sixty per cent of the homes would be allocated to households on the council's waiting list and the rest would be sold at market prices. Under the wetland park scheme, the council would employ local conservation teams to restore habitats, reduce flood risk and provide a park with free entry.
Table 1 shows the estimated effects of the two plans.
| Measure | Housing scheme | Wetland park |
|---|---|---|
| Capital cost | £14 million | £14 million |
| Land used | 18 hectares | 18 hectares |
| Homes provided or protected | 280 new homes | 1,900 existing homes protected |
| Permanent jobs | 42 | 28 |
| Effect on habitat | 12 hectares lost | 15 hectares restored |
Explain why the decision facing Willowbrook Council illustrates the basic economic problem.
Using Extract 1, explain the opportunity cost of choosing the housing scheme.
Analyse how the council's choice between the two plans will affect what, how and for whom output is produced.
Explain one economic benefit of choosing the housing scheme.
Explain one environmental benefit of choosing the wetland park scheme.
Using the information in Extract 1 and your own knowledge, evaluate whether the housing scheme would be the more sustainable choice.
29 exam-style questions on OCR GCSE Economics 1.2 The basic economic problem, covering 1.2.1 Scarce resources and unlimited wants, 1.2.2 The economic problem, 1.2.3 Opportunity cost, and 1.2.4 Costs and benefits of economic choices. Each one has a worked solution and a mark scheme showing where the marks go.