A in-depth analysis of all theme 1 content and all key cards/revision notes provided. This document is designed to help you do well in your theme 1 economics (introduction to markets and the economic problem ) by using my personal notes and detailed examples.
By—Christian an A-level student , this document is designed to help you understand theme 1’s key themes and I
will be using my key cards that I made during class and typing some of my notes up to help you achieve this.
ALEVEL Economics Theme 1 key points
Topic 1—Economic principles and an introduction to markets
Free market economy—market forces are allowed to guide the allocation of resources.
Mixed economy—resources are allocated partly through price signals and also by state intervention
Command economy—decisions on resource allocation are decided by the state.
Critics of these economies…
1. Karl Marx—considered the problems of free market economies
2. Friedrich Hayek—criticised the command economy
3. Adam Smith—also commented on the flaws of the command economy
The three main types of economies have been criticised by notable
economists which will make great evaluation points in your essays.
Learn the definitions above as you will often be asked to recall
them in section A.
Introduction to behavioural economics
• Herding—following others blindly
• Habit—Consumers don’t always respond to price changes
• Heuristics— mental shortcuts that cloud consumers judgements
• Default bias—(e.g. If the new Samsung was better than the new apple , people would still
buy the new apple phone as they believe they are better)
,The economic problem
Allocating scarce resources to unlimited wants. This is a key
fundamental that runs through the heart of all economic
theory.
Opportunity cost is basically what you lose out on by choosing the thing that
you chose. For example— if you buy the new iphone, the opportunity cost of
that purchase would be the pleasure you could've gained from spend the
money on a spa day.
Factors of production—Capital, Land, Labour, Enterprise. These are
what you need to produce a product. An acronym I find helpful is CELL.
4 main functions of money
1. Medium of exchange—an asset that can be used in a transaction to exchange
goods and services
2. Store of value—non-perishable item that holds value to everyone
3. Measure of value—universal way of pricing and item
4. Method of deferred payment— allows goods to be paid for in the future
, Specialisation and the division of labour
Its when a company makes one specific thing and focuses all fac-
tors of production into producing that item
I have listed the pros and cons above but the best ones are arguably:
+ Production time is lower which saves money so lower costs can be
offered to consumers which will increase demand.
- It may drain your workforce as doing the same thing every single day will
become tiering
TIP FOR EXAM:
For evaluation points , try and question the assumptions you have made
with your argument and criticise some of the points you have made using
economic terms.
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