Summary
Summary Economics A level theme 1 revision notes
- Institution
- PEARSON (PEARSON)
This is revision notes for unit 1 economics A, the first year of A level economics A
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Nature of Economics:● Economic goods = resources which are scarce because their use has an opportunity
cost
● Free goods = resources which are not scarce and therefore incur no opportunity cost
● Renewable resources = resources which can be repeatedly exploited as they can renew
themselves
● Non-renewable resources = resources which once exploited cannot be renewed.
● The basic economic problem = resources have to be allocated between competing uses
because wants are infinite whilst resources are scarce.
● Trying to solve the basic economic problem we must determine:
- What should be produced?
- How should it be produced?
- For whom should it be produced?
● Economic agents:
- Governments
- Consumers
- Firms/ businesses
● Ceteris Paribus = all else remains the same ‘assuming ceteris paribus’ (assumption).
● Opportunity cost = the next best alternative foregone - opportunity cost is what has to be
given up when spending on an item, opp. Cost of 1 chocolate bar is 2 bags of crisps.
● Factors of production:
- Land
- Labour
- Capital (machinery)
- Enterprise
● Production Possibility Frontiers (PPF):
- PPF shows how resources are allocated in an economy
- PPF = the maximum potential output of two goods, assuming all factors of
production are fully and efficiently employed.
- Economy cannot be on a point outside the curve because it exceeds maximum
efficiency -
inefficient if inside
the curve
, - When PPF shifts outwards = economic growth
- Can be caused by increase in quantity/ quality of factors of
factors of production
- Inwards shift = due to depletion of resources/ natural
resources
- Examples:
Increase in quality of resources - outwards shift of PPF
Increased u/e - inwards shift of PPF
Increased numbers of workers in economy - outwards shift
of PPF
● Capital goods = goods that are used in the production of
other goods
● Productivity = is output per factor input per time period
● Consumer goods = goods that satisfy needs and wants directly
● Specialisation = is when an entity concentrates on the production of one product or one
part of the production process
- Specialisation by individuals - division of labour = is when the production is
broken down into separate tasks
- Advantages:
- Increased productivity- increase in outputs so higher profits
- More goods available as more specialised goods are available for export
- Less training costs
- Development of skills leading to greater productivity (when productivity goes up,
costs per unit go down
- Disadvantages
- Boredom- (productivity decreases, costs per unit increases) cause quitting
increased training costs
- Breakdown in chain of production can cause chaos
● Perishable = rot
● Commodities = raw materials
● Functions of money:
- Medium of exchange - used to buy and sell goods and services, avoids the need
for a ‘double coincidence of wants’ under a system of barter, can exchange
goods for money, knowing that you can use that money to buy the thing you want
- Measure of value - can quantify each item's value, compare the value of different
goods, and create an agreed ‘ unit of account’. (an agreed way of measuring the
relative worth of different products).
- A store of value- stored to keep spending for later, money hopefully holds its
value dont need to use immediately, inflation would stop money being a store of
value.
- Method of deferred payment- lending if can buy same amount of goods and
services when paid back, money needs to be worth roughly same amount as it is
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