Revision for A level Economics section 1



Scarcity

A situation when a choice is to be made

Everyone in this world has to face this situation of scarcity

It gives rise to the basic economic problem

–        Scarce/limited resources and unlimited wants

 

Choices at all levels

Individuals

Firms

Governments

 

Individuals

The individuals are forced to make a choice

Example

An individual may have to chose whether to buy a shirt or a pant

 

Firms

Firms are also forced to make choices

Example

A firm may have to chose whether to spend the money or marketing department or research and development department

 

Governments

Governments which are considered all powerful too have to make choices

Eg.

Government has to make a choice whether to spend the public money on defense or healthcare

 

Opportunity cost

The next best alternative foregone when a choice is made

Opportunity cost is never in money value

The benefits which could have been received by taking an alternative action.

 

3 Basic Questions

What to produce

How to produce

For whom to produce

 

Different allocative Mechanisms

Market economies

Planned economies

Mixed economies

 

Market economies

Market economy is an economy where resources are allocated by the price mechanism, the consumers determine what is produced.

Very less role of the government

Eg. United States

 

Planned economies

Planned system is an economic system where resources are allocated by the, the state determines what is going to be produced.

No consideration given to market forces or the businesses

Eg. USSR

 

Mixed economies

A form of economy which combines the good features or advantages of market and planned economy

Business activity controlled by market forces

The government provides the essentials: education, health and security

Eg.

 

Production Possibility Curve(PPC)

It is a graph that shows the different rates of production of two goods and/or services that an

economy can produce efficiently during a specified period of time with a limited quantity of productive resources

 

The margin: decision making at the margin

Decision making at the margin means when you have to chose between two products (alternatives)

Eg.

–        You have $ 5 dollars and you have chose whether to buy a dvd worth $4 or drink a soda worth $3

It arises when you cannot buy both the products by your given income(scarcity)

 

Positive statements

Actual facts and figures which are both measurable and comparable

Eg.

The inflation rate for this year was 10%

 

Normative statements

Opinions or suggestions

Often called judgements

Eg.

The inflation rate for this year was very high

 

Ceteris paribus

Other factors or things unchanged

Other factors constant

Situation with other things the same

 

Factors of production

Land

Labour

Capital

Enterprise

 

Land

Natural occurring resources used for production purpose

Eg.

Earth on which mills are built

Water in which fish is found

raw materials used to produce goods

 

Labour

Manual and mental effort to produce or deliver goods and services

People who are willing or able to work are known as labour work force.

Eg. Clerks

Computer technician

GCSE Economics teacher

 

Capital

Manmade goods to produce other goods and services

Capital is classified into capital goods and consumer goods

Eg.

Machines

Factories

Roads

 

Enterprise

The people who bring the other 3 factors of production together to produce goods and services.

In this process they do the decision making and risktaking

Eg

Businessmen

 

Division of labour

Dividing a task into a series of smaller tasks

Each small task is done by a different person by which the productivity is increased

 

Money

Money is anything generally accepted for payment of goods/services

 

Characteristics of Money

Acceptability

Mobility

Divisibility

Scarcity

Similarity

 

Functions of Money

Medium of exchange

Unit of account

Store of value

Standard of deferred payment

 






Rating 4.00 out of 5


3 Responsesto “Revision for A level Economics section 1”

  1. Sandani says:

    Really good stuff… very useful..

  2. kajal says:

    really helpful

Leave a Reply