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.

1. A LEVEL ECONOMICS
SECTION 1
REVISION NOTES
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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.

8. 3 Basic Questions
 What to produce
 How to produce
 For whom to produce

9. Different Allocative Mechanisms
 Market economies
 Planned economies
 Mixed economies

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

14. The margin: decision making at the
margin

15. Positive statements
 Actual facts and figures which are both
measurable and comparable

16. Normative statements
 Opinions or suggestions
 Often called judgements

17. Ceteris paribus

18. Factors of production
 Land
 Labour
 Capital
 Enterprise

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

23. Division of labour

24. Money

25. Characteristics of Money

26. Functions of Money

27. Efficient resource allocation

28. Economic efficiency

29. Productive efficiency

30. Allocative efficiency