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
Summary Cambridge International AS Level and A Level Economics Coursebook with CD-ROM, ISBN: 9780521126656 Unit 6 - Basic economic ideas £6.49
Add to cart
Quickly navigate to
Preview
  2.  
  3. CIE
  4.  
  5. Economics
  6.  
  7. Unit 1 - Basic economic ideas

Summary

Summary Cambridge International AS Level and A Level Economics Coursebook with CD-ROM, ISBN: 9780521126656 Unit 6 - Basic economic ideas
 12 views  0 purchase
  • Institution
  • CIE

An in-depth summary of basic economic ideas and resource allocation, including the most important points and definitions aided in their explanation by graphs.

Preview 2 out of 6  pages

Document information

  • No
  • Chapter 6
  • December 14, 2022
  • 6
  • 2022/2023
  • Summary

Subjects

Connected book

book image

Book Title:

Author(s):

  • Edition:
  • ISBN:
  • Edition:

More summaries for

All for this textbook (13)

Written for

All documents for this subject (25)

Seller

avatar-seller
arthurknight

Available practice questions

Definitions of basic economic ideas and resource allocation.

Flashcards 14 Flashcards
£7.49 0 sales
Flashcards 14 Flashcards
£7.49 0 sales

Some examples from this set of practice questions

1.

What is economic efficiency?

Answer: Where scarce resources are used in the most efficient way to produce maximum output.

2.

What is productive efficiency?

Answer: When a firm is producing at the lowest possible cost.

3.

What is allocative efficiency?

Answer: Where price is equal to marginal cost; firms are producing those goods and services most wanted by consumers.

4.

What is pareto optimality?

Answer: Where it is imposible to make someone better off without making somebody else worse off.

5.

What is an externality?

Answer: Where the actions of producers or consumers give rise to side effects to third parties who did not partake in the action; sometimes referred to as spillover effects.

6.

What is a negative externality?

Answer: Where the side effects have a negative impact and impose costs to third parties.

7.

What is a positive externality?

Answer: Where the side effects have a positive impact and provide benefits to third parties.

Content preview

Unit 6 - Basic economic ideas and resource allocation

Introduction

Economic efficiency: Where scarce resources are used in the most efficient way to
produce maximum output.

Economic efficiency consists of:
● Productive efficiency: Thai occurs when the producers produce at the
lowest cost possible. A firm is productively efficient when it is producing at the
lowest possible cost and making the best use of resources.
● Allocative efficiency: This occurs when firms produce the combination of
goods and services that are most wanted by consumers. The implication is
that there is no waste and both producers and consumers are satisfied with
what is produced. The price that they are willing to pay reflects their
preferences and the benefits they derive from consumption. It represents the
additional benefit of one more unit of a good. The marginal cost of production
is a measure of the opportunity cost of the resources used to produce this
unit. So where the price equals the marginal cost, consumers are prepared to
pay what it costs to produce it (P=MC). It is only where this is so that
resources are allocatively efficient.

Productive efficiency: When a firm is producing at the lowest possible cost.

Allocative efficiency: Where price is equal to marginal cost; firms are producing
those goods and services most wanted by consumers.

When both these parts of economic efficiency co-exist then it is determined that the
best possible use of scarce resources is being made.

A few examples will help explain the macro nature of economic efficiency.
● Oil: The global supply of oil will one day run out, what is not known is when.
Consumption continues to increase not only in developed economies but in
developing economies such as Brazil, India or China. Growing populations,
rising living standards and rising car ownership are just three reasons why
demand is increasing. Oil usage is often inefficient here.
● Timber: The global demand for timber and timber products such as paper
and cardboard shows little sign of abating. By the start of this century only
about ⅕ of the world’s forests remained intact.
● Water: As the global population increases and the effects of climate change
become reality, water becomes scarcer and an even bigger political issue.

, Productive efficiency

Productive efficiency can be shown using a firm’s average cost curve.



Costs Average costs of
production




x
p




0
q

Output
Competition can be seen to cause productive efficiency. This is because firms are
constrained to reducing costs in order to reduce price in a competitive market.

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 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 arthurknight. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for £6.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

53340 documents were sold in the last 30 days

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

Start selling
£6.49
  • (0)
Add to cart
Added