Economics AS Level Notes

Economics Definition – The study of how to allocate scarce resources in the most effective way Economic Problem Definition – How to allocate scarce resources among alternative uses Household Definition – A group of people whose spending decisions are connected Microeconomics Definition – The study of how households and firms make decisions in markets Macroeconomics Definition – The study of issues that affect economies as a whole The Basic Economic Problem The fact that resources are scarce compared to the unlimited wants → Choices having to be made Goods Definition – Tangible products, i.e. products that can be seen and touched, such as cars, food and washing machines Services Definition – Intangible Products, i.e. products that cannot be seen or touched, such as banking, beauty therapy and insurance Factors of Production Factors of Production Definition – The resource inputs that are available in an economy for the production of goods and services The Four Factors: Land – This is a natural resource. Things such as oil, coal, rivers and the land itself. Labour – This is the human resource that is available in any economy / The quantity and quality of human resources Some economies (generally poor countries) have large populations but lack a skilled workforce and for other countries like Germany with declining populations, they depend on immigrant workers to do both skilled and unskilled jobs. Quality of labour is essential for economic progress. Capital - Man-made aids for production / Goods used to make other goods It is combined with Land and Labour MERC - Machines, Equipment, Robots and Computers Entrepreneurship - The willingness of an entrepreneur to take risks and organise production. Entrepreneur Definition - Someone who bears the risks of businesses and who organises production. Some Extra Definitions The world’s poorest countries tend to have few or poor Factor Endowments (vice versa). Factor Endowments Definition - The stock of factors of production Production Definition -The output of goods and services Want Definition - Anything you would like, irrespective of whether you have the resources to purchase it Scarcity Definition - A situation where there are insufficient resources to meet all wants Choice Definition - The selection of appropriate alternatives Opportunity Cost Definition - The cos