100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Cambridge A-Level Economics (9708-A2 Only) Notes CA$36.31   Add to cart
Quickly navigate to
Preview
  2.  
  3. Cambridge A-Level
  4.  
  5. Cambridge A-Level

Other

Cambridge A-Level Economics (9708-A2 Only) Notes

2 reviews
 1437 views  2 purchases
  • Course
  • Cambridge A-Level
  • Institution
  • Cambridge A-Level

A* standard notes required for Cambridge A-Level Economics (9708) which covers the whole syllabus for the A2 component only. AS Economics Notes are sold separately.

Preview 2 out of 76  pages

Document information

  • November 30, 2022
  • 76
  • 2021/2022
  • Other
  • Unknown

Subjects

  • economics
  • 9708
  • a2 economics notes
  • cambridge a level economics notes
  • cambridge a level economics 9708

Written for

  • Cambridge A-Level
All documents for this subject (13)

2  reviews

review-writer-avatar

By: hanayoon05 • 9 months ago

review-writer-avatar

By: schooltamo • 1 year ago

Seller

avatar-seller
soniaasanjay

Reviews received

Content preview

A-LEVEL ECONOMICS (9708)
A2 Content 1: Basic economic ideas & resource allocation
1.1 Efficient resource allocation
● Economic efficiency: where scarce resources are used in the most efficient way to
produce maximum output
○ Best possible solution to economic problem
○ Eg. Agriculture: When max crop yields result from given land area
○ Eg2. Manufacturing: As much output produced from given set of inputs




es
○ Achieved when economies worldwide are using all of the world’s resources efficiently
○ Impossible to increase the output of one good without sacrificing the other
○ Productive efficiency: when a firm is producing at the lowest possible cost using the
least possible resources
■ Eg. car assembly plant using most up to date technology;




ot
minimising COP
■ Productive efficiency = minimum point of LRAC
■ Can only exist when economy is producing on the boundary
of its PPC (on the line: X)




N
● Point X: Productive efficiency
○ Can’t produce any more because resources
are scarce & minimum possible resources
are being used
● Point Y: Product inefficiency
ay ○ More products can be made with resources available
■ Competition can lead to productive efficiency
● Firms constrained to produce at lowest possible cost in a competitive
market
● Profit incentive = make products at lowest
nj
possible cost
■ Diagram:
● P = price
● Q = quantity
Sa

● Productive efficiency & allocative efficiency is
achieved at pq
● Long run equilibrium = perfectly competitive
firms is given by price & quantity
○ Allocative efficiency: where price is equal to marginal cost; firms are producing those
goods and services most wanted by consumers
■ Price = Marginal Cost (P= MC)
a



● Marginal cost = measure of opportunity cost of the resources used to
produce this unit
● When price = marginal cost, consumers are prepared to pay what it
ni




costs to produce it
● Price paid by consumer = true economic cost of producing the last
unit of the product
○ Economic cost: combination of losses of any goods that have
So




a value attached to them by any one individual
■ Opportunity cost is the benefits lost from rejecting
another good, economic cost is the loss lost from
rejecting another good
■ Resources perfectly follow consumer demand at equilibrium
■ When firms produce combination of g/s most wanted by consumers
● Allocative inefficiency occurs when g/s is over/under produced,
preventing an outcome which will maximise consumer satisfaction
■ No waste; producers & consumers satisfied infinite wants

, ● Ensures right amount of product is produced
● Price willing to pay reflects preferences & benefits derived from
consumption
● Represents additional benefit derived from consumption of one more
unit of a good
● Maximisation of society surplus
■ Can’t illustrate on PPC
● Any point on frontier could be a point provided price = marginal cost




es
at this point
● Exact location depends on consumer preferences (not under PPC)
■ Competition leads to allocative efficiency
● Perfect competition; firms constrained to produce goods that
consumers want relative to their COP




ot
■ Eg. 7th unit cost $8 but consumers only
value at $5 (P<MC)
● P<MC = loss for producer
● 4th unit is P = MC




N
■ Motivations for allocative efficiency
● Make greatest possible profit
● Competitive markets forces firms to produce goods demanded by
consumers
● Pareto optimality: where it is impossible to make someone better off without making someone
ay
else worse off
○ When resources are allocated in the most efficient way where
it is impossible to increase the production of one good without
decreasing the production of another good
○ Will occur on PPC
nj
■ Point X: Pareto inefficient
● Can still make one person is made better off
without making someone else worse off
○ Improvement in economic efficiency
Sa

needs compensation to those that are
worse off
■ Point Y: Pareto efficient
● impossible to increase output of capital goods without reducing output
of consumer goods
○ Eg. New road benefits users of the road (journey shortened) but people staying near
the roads affected by noise/pollution
a



● Dynamic efficiency: the greater efficiency a firm benefits from over a period of time due to
improvements in technical/productive efficiency
○ When firms meet changing needs of the market by innovating/changing production
ni




process in response to competitive pressures
○ Eg. firms use excess profits for R&D, bringing consumers benefits (new tech & lower
prices ) & giving firm more efficient production process
○ Long term with opportunity cost
So




■ Obtain investment funds from dividends or borrowing
■ Results in higher costs in short run before payback years
later after investing
○ Dynamic efficient firm’s long run and cost curve shifts down
■ LRAC1 to LRAC2: Cost reduce while output remains
unchanged
○ Eg. Motor vehicle manufacturing
■ Growing intensity of competition to be more fuel
efficient/less pollutant

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

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

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

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 soniaasanjay. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$36.31. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

77254 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
CA$36.31  2x  sold
  • (2)
  Add to cart