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Summary OCR GCSE Economics full specification revision notes

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Module
Economics

Institution
GCSE

Global trade, macroeconomics, and microeconomics are just a few of the topics covered in-depth in the OCR GCSE Economics revision notes. These notes, which include important definitions, theoretical frameworks, and practical applications, are made to help students prepare for exams effectively and ...

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Institution GCSE
Education GCSE
Module Economics
School year 200

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OCR GCSE Economics 9-1

MICROECONOMICS

1.1: Main Economic Groups and Factors of Production

There are three main economic groups:
→ Consumers: A person or organisation that directly uses a good or service.
→ Government: A political authority that decides how a country is run and manages its operation.
→ Producer: A person, company or country that makes, grows or supplies goods and/or services.

Interdependence
Producers and consumers pay taxes to the government. The government provide benefits to consumers
and subsidies to producers. A consumer spends money on goods and services, and producers pay wages
to workers.

Factors of production are the resources in an economy that can be used to make goods and services.
Capital: The factor of production that relates to the human-made aids to production
Enterprise: The factor of production that takes a risk in organising the other three factors of production.
The individual who takes this risk is known as an entrepreneur.
Labour: The factor of production that is concerned with the workforce of an economy in terms of both
the physical and mental effort involved in production
Land: The factor of production that is concerned with the natural resources of an economy, such as
farmland and mineral deposits

How might they be combined?

Enterprise → An entrepreneur bears the risk and takes forward a business idea.
Land, Labour, Capital → The entrepreneur decides on the quantities of the different factors of
production to combine and organise them during production.
This results in the production of goods and services

1.2: The Basic Economic Problem

Scarce resources are where there is an insufficient amount of something to satisfy all wants.
Unlimited wants mean the desire for anything a consumer would like, whether or not they have the
resources to purchase it.

The economic problem is how to best use limited resources to satisfy the unlimited wants of people.
To try and meet consumers’ wants, choices and decisions have to be made regarding the following:
→ What should be produced?
→ How should it be produced?
→ Whom should it be produced for?

Opportunity cost is the next best alternative given up when making a choice

,Economic choices options for the use of selected scarce resources. The costs and benefits of economic
choices are weighed against each other for the producer to make the best decision:
→ Economic sustainability: The best use of resources in order to create responsible development or
growth, now and into the future
→ Social sustainability: The impact of development or growth that promotes an improvement in quality
of life for all, now and into the future
→ Environmental sustainability: The impact of the development or growth where the effect on the
environment is small and possible to manage, now and into the future

Renewable resources are resources that can be used repeatedly and can replenish themselves over a
period of time.
Non-renewable resources are resources with economic value, but can not be replaced or renewed after
use

2.1: The role of markets

A market is a way of bringing together buyers and seller to buy and sell goods and services.
Market economy: An economy in which scarce resources are allocated by the market forces of supply
and demand.

The production of goods takes place in three sectors:
→ The Primary sector refers to the direct use of natural resources, such as the extraction of basic
materials and goods from land and sea.
→ The Secondary sector refers to all the activities in an economy that are concerned with either
manufacturing or construction.
→ The Tertiary sector refers to all the activities in an economy that involve the idea of a service.

The product and factor markets are concerned with buyers and sellers of goods and services and the
factors of production.
Product market: Market in which final goods or services are offered to consumers, businesses and the
public sector.
Factor market: Market in which the services of the factors of production are bought and sold.

Interdependence: The household provides labour to the firm, who provide wages in return. The household
then provides the firm with payments in return for goods and services.

Specialisation and Exchange

Specialisation is the process by which individuals, firms, regions and whole economies concentrate on
producing those products that they are best at producing.
Exchange is the giving up of something that the individual or firm has, in return for something they wish
to have but do not possess.

Division of Labour: Where workers specialise in, or concentrate on, one area of the production process.

, 2.2: Demand

Demand is the willingness and ability to purchase a good or service at a given price in a given time
period.
The law of demand states that for most products, the quantity demanded varies inversely with its price

→ Individual demand: The demand for a good or service by an individual consumer
→ Market demand: The total demand for a good or service, found by adding together all individual
demands.

Factors affecting Demand

➔ Incomes: Income rises will mean consumers are able to buy more goods and services at every
price
➔ Marketing: All forms of marketing are essentially designed to increase the demand for a product.
➔ Tastes and fashion: Over time, consumers’ taste change and so too does fashion.
➔ Substitutes: If the price of one product rises then people will change to buying the substitute
➔ Complements: If the demand for one goes up, due perhaps to a fall in price, so too does the
demand for the complementary product
➔ Population
➔ Government Policies: Imposing taxes reduces demand, whereas subsidies increase demand for
products
➔ Economic Situation: The state of the economy affects the income rates and therefore affects the
demand
➔ Price expectations: If people expect prices to rise for a product, they are likely to demand more
of the product now.

Price Elasticity of Demand

Price elasticity of demand is the responsiveness of quantity demanded to a change in the price of the
product
Elastic demand is when the percentage change in quantity demanded is greater than the percentage
change in price
Inelastic demand is when the percentage change in quantity demanded is less than the percentage change
in price

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