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A LEVEL ECONOMICS

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A LEVEL ECONOMICS SECTION 1 REVISION NOTES www.fetsystem.com * Scarcity A situation when a choice is to be made Everyone in this world has to face this situation of ... – PowerPoint PPT presentation

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Title: A LEVEL ECONOMICS


1
  • A LEVEL ECONOMICS
  • SECTION 1
  • REVISION NOTES
  • www.fetsystem.com

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
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