A detailed summary of all the important points needed to hit the high A on the exam.
Includes chapters:
Chapter 1: Scarcity, choice and opportunity cost
Chapter 2: Economic methodology
Chapter 3: Factors of production
Chapter 4: Resource allocation in different economic systems
Chapter 5: P...
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Unit 1 - Basic economic ideas
and resource allocation (AS
Level)
Chapter 1: Scarcity, choice and opportunity cost
Chapter 2: Economic methodology
Chapter 3: Factors of production
Chapter 4: Resource allocation in different economic systems
Chapter 5: Production Possibility Curve
Chapter 6: Classification of goods and services
Chapter 1: Scarcity, choice and opportunity cost
Key words and tips Notes
Fundamental economic Fundamental economic problem arises
problem – scarce resources but because resources are scarce while
unlimited wants; sometimes people’s wants are unlimited
called the basic economic
Making a choice involves taking decisions
problem
on how to allocate scarce resources
Resources – inputs available between many competing uses
for the production of goods and
Opportunity cost is the cost of the choice in
services
terms of the next best alternative
Unit 1 - Basic economic ideas and resource allocation (AS Level) 1
, Wants – the goods and services
that people may like to have but
are not always realised
Needs - things that are
necessary for survival (food,
water, shelter, rest, etc)
Scarcity - a situation in which
wants and needs are greater
than the resources available
Choice - resources are scarce,
so economic agents have to
consider alternatives
Factors of production -
resources or inputs available in
an economy that are used in the
production of goods and
services
Firm - any business that hires
factors of production to produce
goods and services
Opportunity cost - the cost
expressed in terms of the next
best alternative that is foregone
when a choice is made
TIP: Consider opportunity cost
when studying situations where
choices are made
🍘 SUMMARY: scarce resources that cannot satisfy unlimited wants create
the need to make choices and the problem of efficient allocation of
resources
Unit 1 - Basic economic ideas and resource allocation (AS Level) 2
, Chapter 2: Economic methodology
Key words and tips Notes
Macroeconomics - the Decision making at the margin is basically
study of an economy or a making decisions at the point where benefits >
group of economies expenses or benefits = expenses
Microeconomics - the study very important:
of individual markets
Positive statement - a statement that is
(households + firms)
based on facts or actual evidence
Models - a simplified view of
Normative statement - a statement that is
reality used to explain
based on the economist's opinion or value
economic problems and
judgement and which cannot be proven
issues
Positive statement - a
statement that is based on
facts or actual evidence
Normative statement - a
statement that is based on
the economist's opinion or
value judgement and which
cannot be proven
Ceteris paribus - "other
things equal/unchanged" =
one change at a time
Short run - time period when
a firm can change at least
one but not all factor inputs
Long run - time period when
all factors of production are
variable but with a constant,
such as the state of
technology
Very long run - time period
when all key inputs into
production are variable
Unit 1 - Basic economic ideas and resource allocation (AS Level) 3
, 🍘 SUMMARY: Positive statement is a statement that is based on facts or
actual evidence. Normative statement is based on economist's option or
value judgement and cannot be proven to be right or wrong. Ceteris
paribus means other things equal, and is used in explanation judgements
to outline that only one variable is changing.
Chapter 3: Factors of production
Key words and tips Notes:
Entrepreneur - an individual Factors of production are the resources
who seeks out new business available in the economy and are the means
opportunities and is willing to by which an economy produces a whole
take risks range of goods and services
Owners of factors of production receive
payments when the factors of production are
used
Land - a factor of production
which refers to the natural Reward for owning land is the rent or income
resources in the economy that its owners receive (in case of natural
resources like minerals/oil the reward can be
a payment after the extraction of such
resource
The quality and quantity of land affects
Labour - a factor of greatly its productive use, and is often
production that refers to brought up considering modern issues like
human resources in the climate change
economy Low-income economies tend to have a
Low income countries (LIC) large quantity of labour available, but it
- economies where income usually lacks the quality; this forces majority
per capita was $1025 or less of the work force to be in low paid unskilled
in 2018 jobs
Labour is also greatly affected by
cultural/religious ideas, eg women not being
allowed to work at all/in some jobs
Unit 1 - Basic economic ideas and resource allocation (AS Level) 4
, Some countries (Russia, Germany, Japan)
have declining population making them rely
on migrant workers to do skilled and unskilled
jobs
Quality of labour has great effect on
economic progress (eg indian IT increasing
Division of labour - where a leading to higher importance of the country
manufacturing process is split globally)
into a sequence of individual Reward for workers how supply their
task employers with "labour" is wage
Division of labour usually leads to greater
productivity and efficiency, as each worker is
focused on their simple individual task, and
then the final piece comes together by
summing all the workers tasks
It also makes process (and the final product)
much cheaper
And allows workers to become more
specialised (arguable about sm mass
producing factory though) leading to a
greater output per worker + quality of the final
product
High income countries (HIC) (famous in US for 1920s mass production of
- economies where income pretty much anything, but mainly cars by
per head was $12'376 or more Ford)
in 2018
Yet, workers pay for the benefits of the
Human capital - the value of division of labour due to possible boredom of
labour [in contributing] to the repeating same tasks
productive potential (future
In HIC this has been recognised and idea of
growth) of the economy
moving workers around production plant in
the drive for maximum efficiency
Human capital is a term that refers to the
people or the workforce who are available
for various jobs
Unit 1 - Basic economic ideas and resource allocation (AS Level) 5
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