Cambridge International as and a level Economics Ebook

particular relevance when evaluating the effi
ciency of 
market structures (see 
Chapter 7
).
Th
is notion of economic effi
ciency can be looked 
at from a global perspective. Economic effi
ciency is 
achieved when economies are using all of the world’s 
resources in the best possible way. We frequently hear 
concerns that, as a global society, we are failing to do 
this. Th
is point is very clearly made in 
Chapter 4 
where 
the use of protectionist trade policies is considered. We 
have to conclude that global economic effi
ciency is not 
being achieved.
A few more simple examples will help to explain the 
macro nature of economic effi
ciency:
■
Oil: The global supply of oil will one day run out, although 
just when this will happen is not clear. Consumption 
continues to increase not only in developed economies but 
increasingly in developing and emerging economies such 
as Brazil, China, India and Pakistan. Growing populations, 
rising living standards and rocketing car ownership levels 
are just three reasons behind this increase in demand. Here 
and elsewhere the use of oil is invariably ineff icient; much is 
wasted through traff ic congestion, the use of gas-guzzling 
vehicles and the ineff icient use of oil and oil products in 
manufacturing.
■
Timber: The world demand for timber and timber products 
such as paper and cardboard shows little sign of abating. By 
the start of this century, only about one-fift h of the world’s 
forests remained intact, with the worst destruction being 
that of the Amazonian rainforests and other forests in the 
Congo Basin, Canada and South East Asia. The costs of this 
destruction are overlooked by the large, powerful global 
companies who control the sale of timber and pulp on the 
world market.
■
Water: As the global population grows and the eff ects of 
climate change become reality, water as a resource 
will get scarcer and be an even greater political issue. 
This is already beginning to occur in those countries that 
share natural water resources such as China and India. 
Scant attention is oft en paid in developed countries as 
to how more eff icient use can be made of this essential 
resource.
Introduction
Th
e fundamental economic problem was considered 
earlier in 
Chapter 1
. Th
is was explained as the diffi
culty 
of having limited or scarce resources with which to do an 
infi nite number of things. In turn, this leads us to having 
to make choices.
Th
e basic concept of