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Summary AS Level Notes Economics Unit 1 Nature of Economics
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Unit 1 Economics As level notes Revision Notes
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Scarcity Limited resourcesanol unlimited wants Note Economics is the study ofEmhg
inmg i
IILabour
intotn t.it
Capital
people involved
man made factors
of production ex
in production
in production ex doctors
machines
accountants
roads
II
exointishare.mg ne
Enterprisespeople whoorganise other threefactors of production
and take risks usingtheir ownmoney ex SteveJobs BillGates
Economic Problem
There are 4factors
of production land labour capital and enterprise which are also limited
resources However there are also unlimited wants which result in an economic problem scarcity
Due to scarcity we are forced to make choices on how to allocate our resources
which results in an opportunity cost
Opportunity costs next best alternative forgone when a choice is made
Make choices What to produce
How to produce
Forwhom to produce
Non renewable resources resources which will eventually run out can not bereplaced
ex oil gas
Renewable resources resource which are replaced by nature
ex Solarpower grass
Consumer good goods that are bought and used by consumers
ex car pen
Capital good good used to make other goods
ex machines roads building
Productivity total amount of goods1services producedbya single person pertime period
Production Possibility Frontiers PPF
PPF shows maximum possible combinations of capital and consumer goods that the
economy can produce with the given resources
A curve because factors of production are not homogenous not same
CAVE n CONVEX
apital
T l 7
A B
good Longrun economic growt
impossibleunattainable
yo AB C D
60 Aceycient
l allocation
D Short run
I Economic
30 QB grow
I
iiefficient unemployed
allocationortsoukest
of l
YouhavePager
go to go Consumer
good
, ex Opportunity cost of manufacturing
Shift
n of PPF n 100 phones instead of 120 is
50 40 10 10 more TV's
Depletion reduction
A B B a
Positive Growth Negative Growth
Causes 9qualityIquantityofresources qualitylouvantityof resource
technology advancement War
discover newrawmaterials Depletion ofresources
9 labour productivity dbbour productivity
Ceteris Daribus We change one thing all other things unchanged
Positive statements True or false containsdata usually
ex Unemployment rate is 12
Normative statements Opinion whatishigh
ex Unemployment rate is high
Different typesof PPF
apital capital
goods n goods n
p of
tr
cons D's consumer
p goods
fallin capital production rise in consumer goods
no change in consumer production nochange in capital goods
cause fall inefficiency cause Improvement in technology
Change in resources making production moreefficient
thataffect capital goods
manufacture
Specialisation when a worker focuses on a specific taskand becomes expert on it
Division oflabour separating work into different parts performing by different people
who are able to specialise attheir task which increases productivity
d cost perunit
Adam Smith
Hestated concempt of specialisation and division of labour
Showed howto increase labour productivity
firms increase efficiency and lower cost production
of
Pintheory ityoumake one byyourself it would take months
it youseparate work into different parts performed bydifferent people it would take
a lot less time toproduce a pin
Division
of labour1Specialisation
pairingstandards
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