Summary A* Complete Macro economics notes for Edexcel Economics
6 views 0 purchase
Course
Microeconomics
Institution
PEARSON (PEARSON)
Ace your economics exams with this complete Macro Economics notes.
ALL the macro notes that helped me get a A* predicted in Economics.
Organised effectively to maximise productivity while studying
Complete with all important explanation, evaluations, diagrams and chain of analysis - All in...
Microeconomics 1: The economic problem
Basic economic problem and factors of production
Basic economic problem: Scarce resources, unlimited wants
- Finite resources, in nite wants
3 basic economic questions:
1. What: what goods and services should be produced in a society from its scarce
resources
2. How: How should the productive resources of the economy be used to produce
these various goods and services
3. For who: Having produced a range of goods and services, how should these be
allocated among the population for consumption
• Factors of production: Anything used in the production of goods and services
1. Land: All natural resources provided by nature. Reward = Rent
2. Labour: Includes physical and mental e ort of people in the production of goods
and services. Reward = Wages
3. Capital: Man made goods that are used in production. Reward = Interest rate
4. Enterprise: people who take risks to bring new products to the market or to start
a new business. Reward = Pro t
• Due to the problems of scarcity, decisions have to be made by consumers,
producers and the government about the most e cient use of these resources
- More scarce a resource is, higher the price
- Less scarce a resource is, lower the price
• Renewable resource: Resource that is naturally replenished and can be used
continuously
• Non renewable resource: Resource that cannot be naturally replenished at the pace
it is being used at
Opportunity cost and PPF
Opportunity cost: It is the next best alternative forgone for a decision made
- There is an opportunity cost for resource allocation
PPF: Shows the total combinations of 2 goods that can be produced when all factors
of production are fully employed
- Gradient of PPF shows opportunity cost
- Any point inside the PPF is attainable, but ine cient (Shift inwards - Recession)
1
fi fi ff ffi ffi
, - Any point on the PPF shows e cient production
- Any point outside the curve is unattainable with current factors of production
(Outward shift - Economic growth)
PPF can show:
1. Opportunity cost: Any movement along the PPF shows that the production of one
god can only increase when a tradeo is made by decreasing the production on
the other good
2. Scarcity: Can be shown by any point outside the curve. There are limited/
insu cient resources to produce in nite goods
Market
Market: Any place or mechanism that brings together buyers and sellers in order to
trade or exchange products
Competitive market: A market in which there are large number of buyers and sellers
possess good market information and can easily enter or leave the market
Types of markets
1. Market economy: Market forces operate freely to determine the allocation of
resources
Advantages:
- No tax
- Higher productivity
- Lower prices
- Responds quickly to change in price
- Pro t motive
- Higher quality of good
2. Planned economy: When the government owns all factors and production and
determines the allocation of goods and services
Advantages:
- No monopoly (Prevents exportation of consumers)
2
fiffi ffi fi ff
, - Equality
- Focuses of quantity
- Less unemployment
Disadvantages:
- Lower quality
- Less innovation
- Lower e ciency
- May lead to black markets
3. Mixed economy: Resources are partly allocated by the government and partly by
the market
Advantages:
- No harmful goods
- Prevents exploitation of consumers
- Prevent market failure
- No monopoly
- Lower unemployment
Disadvantages:
- Taxes discourage rms to increase production
- Firms may be forced to produce goods that are not pro table
- Government may add very high taxes
Microeconomics 2: Demand and supply
Demand
Demand: It is the ability and willingness of consumers to purchase a speci c quantity
of a good at a speci c price, ceteris paribus
Law of demand: When price increases, quantity demanded decreases. When price
decreases, quantity demanded increases
Extension in demand: Quantity demanded increases due to decrease in price
(movement on the demand curve to the right)
Contraction in demand: Quantity demanded decreases due to increase in price
(movement on the demand curve to the left)
Increase in demand: Outward shift in the demand curve
Decrease in demand: Inward shift in the demand curve
Veblen e ect: Type of luxury good for which the quantity demand increases as price
increases
Normal goods: Goods for which quantity demanded increases as real incomes
increase
Inferior goods: Goods for which quantity demanded decreases real incomes increase
3
ffi
ff fi fi fi fi
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller kabirsomeshwar. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $25.97. You're not tied to anything after your purchase.
