Economics Revision Document

Sunny’s IGCSE/MYP Economics _Part 1. 1 Sunny’s Econ Blog.naver.com/econmania www.masterprep.net

Sunny’s IGCSE/MYP Economics 2 www.masterprep.net

Sunny’s IGCSE/MYP Economics 3 Contents Section 1. The basic economic problem 1.1 The nature of the economic problem 1.2 The factors of production 1.3 Opportunity cost 1.4 Production possibility curve diagrams (PPC) Section 2. The allocation of resources 2.1 Microeconomics and macroeconomics 2.2 The role of markets in allocating resources 2.3 Demand 2.4 Supply 2.5 Price determination 2.6 Price changes 2.7 Price elasticity of demand (PED) 2.8 Price elasticity of supply (PES) 2.9 Market economic system 2.10 Market failure 2.11 Mixed economic system Section 3. Microeconomic decision makers 3.1 Money and banking 3.2 Households 3.3 Workers 3.4 Trade unions 3.5 Firms 3.6 Firms and production 3.7 Firms’ costs, revenue and objectives 3.8 Market structure www.masterprep.net

Sunny’s IGCSE/MYP Economics 4 www.masterprep.net

Sunny’s IGCSE/MYP Economics Section 1. The basic economic problem 1.1 The nature of the economic problem 1.1.1 Finite resources and unlimited wants • Definition and examples of the economic problem in the contexts of: consumers; workers, producers; and governments. Economic problem The economic problem arises because the people that make up society have unlimited wants and needs, while society only has access to a finite resource base. As a result, we cannot have everything we want, and so we have to make choices. Making a choice involves a sacrifice(= opportunity cost). In the contexts of: consumers; workers; producers; and governments The fact that people have to choose which products to buy, what jobs to do, and which products to produce shows that there are insufficient resources. • As consumers, we cannot have everything we want. We have limited incomes. • Workers have to make choices about what jobs they do. Some teachers may carry out other work in the evening, but when they are teaching they are not working as writers! Time is in limited supply. • Producers have to decide what to make. Farmers can not grow rice and wheat on the same land. They have to select one crop as land is scarce. • The government has to decide how to spend tax revenue. Deciding to build a new hospital may mean that it cannot build a new school. 5 Scarcity: Unlimited wants vs. Limited resources People must make choices Opportunity costs occur www.masterprep.net

Sunny’s IGCSE/MYP Economics 1.1.2 Economic and free goods • The difference between economic goods and free goods. A free good is one which is so abundantly available that no sacrifice has to be made to supply or use. A free goods have no opportunity cost because no resources are required to produce them. An economic good is a good or resource that is scarce in comparison to the demand for that good or resource. Therefore, to acquire an economic good, a sacrifice must be made. Economic goods require factors of pr