Study guides, Revision notes & Summaries

scarce resources : resources that are limited or finite opportunity cost : the value of the next best alternative forgone economic problem : resources are scarce but wants are unlimited production possibility frontier : a diagram that shows all the combinations of two goods that can be produced when all factors of production are being used normative statement : an economic statement based on a value judgement and therefore cannot be tested positive statement 2 : an economic stateme...

1.1.1 - The Economic Problem : The basic economic problem : Scarcity - unlimited wants and finite resources, so choices have to be made. Resources have to be used and distributed optimally. Scarcity refers to the shortage of resources in relation to the quantity of human wants. Scarcity Example : For example, if you only have £1 and you go to a shop, you can buy either the chocolate bar or the packet of crisps. The scarcity of the resource (the money) means a choice has to be made ...

Economics : The study of the allocation of scarce resources. Economic Goods : Resources that are scarce. Short Run : A time period where at least one factor of production is fixed. Long Run : A time period where all factors of production are variable. Productivity : The output per unit of input. The Economic Problem : Resources are scarce but wants are infinite. 2 Scarcity : The world's resources are limited, there are only limited amounts of land, water, oil, food, etc.. Therefo...

Backwards vertical integration : a joining together into one firm of two or more firms where the purchaser merges with/takes over one or more of its suppliers Conglomerate integration : a joining together into one firm of two or more firms producing unrelated products Demerger : when a firm splits into two or more independent businesses Divorce of ownership from control : when managers and directors of a business are different from the owners of a business (the shareholders) Forward ...

Firm : An organisation that brings together factors of production in order to produce output. Reasons Firms Grow : 1. Increase market share. 2. Increase economies of scale. 3. Gain power. Reasons Firms Remain Small : 1. Legal barriers. 2. Overt barriers 3. High sunk costs. 4. Niche-market business. 5. Lack of expertise. 6. Optimum efficiency achieved. Barriers to Entry 2 : Obstacles that ensure the continued existence of monopoly power of firms in a market. Predatory Pricing : P...

GDP : Gross domestic product measures the value of goods and services produced in an economy, it also measures national income/national expenditure Nominal GDP : Measures the monetary value of GDP (this may include the effects of inflation) Real GDP : Measures GDP adjusted for the effects of inflation, it measures the actual purchasing power of consumers in an economy GDP per capita : Is the level of GDP divided by population The volume of goods and services : Is the quantity produc...

Economics : The study of the allocation of scarce resources. Economic Goods : Resources that are scarce. Productivity : The output per unit of input. The Economic Problem : Resources are scarce but wants are infinite. Scarcity : The world's resources are limited, there are only limited amounts of land, water, oil, food, etc.. Therefore, resources are scarce

Market : Where consumers and producers come into contact with each other to exchange goods and services Utility : The amount of satisfaction obtained from consuming a good or service Rational decision making : Where consumers allocate their expenditure on goods and services to maximize utility, and producers allocate their resources to maximize profits Demand : The quantity of a good or service purchased at a given price over a given period of time Demand curve : Shows the quantity ...

Macroeconomics : The study of the economy as a whole, including inflation, growth and unemployment. Aggregate demand : The total amount of goods / services demanded in an economy at a given time at a given price level. Aggregate supply : Total amount of goods and services supplied in the economy at a given time at given price level. What is GDP? : Gross Domestic Product = the total value of all goods and services produced in an economy in a given time period. What does % change in ...

Absolute advantage : When a country's output of a product per unit of input is greater than that of any other country. Absolute poverty : When a person does not have the income or wealth to fulfil their basic needs. Aggregate Demand (AD) : The total demand/spending in an economy at a given price level over a given period of time. Made up of consumption, investment, government spending and net external demand. Aggregate Supply (AS) : The total amount of goods and services that can be ...