This document provides revision notes on key economic concepts for A-Level Economics. It discusses scarcity and the basic economic problem of limited resources and unlimited wants. It also covers the three basic questions of what, how, and for whom to produce. It defines different allocative mechanisms like market, planned, and mixed economies. It outlines the four factors of production - land, labor, capital, and enterprise. Key terms discussed include opportunity cost, production possibility curve, positive and normative statements, ceteris paribus, division of labor, money, and the functions and characteristics of money. The goal of efficient resource allocation and types of economic efficiency like productive and allocative efficiency are also mentioned.
2. Scarcity
A situation when a choice is to be made
Everyone in this world has to face this
situation of scarcity
It gives rise to the basic economic
problem
– Scarce/limited resources and unlimited wants
3. Choices at all levels
Individuals
Firms
Governments
4. Individuals
The individuals are forced to make a
choice
Example
An individual may have to chose whether
to buy a shirt or a pant
5. Firms
Firms are also forced to make choices
Example
A firm may have to chose whether to
spend the money or marketing
department or research and development
department
6. Governments
Governments which are considered all
powerful too have to make choices
Eg.
Government has to make a choice
whether to spend the public money on
defense or healthcare
7. Opportunity cost
The next best alternative foregone when a
choice is made
Opportunity cost is never in money value
The benefits which could have been
received by taking an alternative action.
10. Market economies
Market economy is an economy where
resources are allocated by the price
mechanism, the consumers determine
what is produced.
Very less role of the government
Eg. United states
11. Planned economies
Planned system is an economic system
where resources are allocated by the, the
state determines what is going to be
produced.
No consideration given to market forces or
the businesses
Eg. USSR
12. Mixed economies
A form of economy which combines the
good features or advantages of market
and planned economy
Business activity controlled by market
forces
The government provides the essentials:
education, health and security
Eg.
13. Production Possibility Curve(PPC)
It is a graph that shows the different rates
of production of two goods and/or
services that an economy can produce
efficiently during a specified period of time
with a limited quantity of productive
resources
19. Land
Natural occurring resources used for
production purpose
Eg.
Earth on which mills are built
Water in which fish is found
raw materials used to produce goods
20. Labour
Manual and mental effort to produce or
deliver goods and services
People who are willing or able to work are
known as labour work force.
Eg. Clerks
Computer technician
O level economics teacher
21. Capital
Manmade goods to produce other goods
and services
Capital is classified into capital goods and
consumer goods
Eg.
Machines
Factories
Roads
22. Enterprise
The people who bring the other 3 factors
of production together to produce goods
and services.
In this process they do the decision
making and risktaking
Eg
Businessmen