Updated 2024 Edexcel A-level Economics Theme 1

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. Scarcity - The world's resources are limited, there are only limited amounts of land, water, oil, food, etc.. Therefore, resources are scarce. Free Goods - Goods that are unlimited in supply and therefore have no opportunity cost. Economic Agents - Consumer, Business and Governments. Agents involved in Economic transactions. Production Possibility Frontier - The maximum potential output of a combination of goods an economy can achieve when all its resources are fully and efficiently employed, given the level of technology. Opportunity Cost - The next best alternative foregone. Economic Growth - Increase an economy's productive potential. Capital Goods - Goods intended for use in production, rather than by consumers. Consumer Goods - Goods designed for use by final consumers. Renewable Resources - A resource whose stock level can be replenished naturally over a period of time. Non-renewable Resources - A resource whose stock level decreases over time as it is consumed. Ceteris Paribus - 'All other things (factors) remaining the same' The assumption that all other variables within a model remain constant whilst the change is being considered. Positive Statement - A statement based on facts which can be tested as true or false and are value-free. Normative Statement - A statement based on value judgements which cannot be tested as true or false. Adam Smith - The Father of Economics; - The Invisible Hand (workings of the Price Mechanism) - Specialisation - Division of Labour Division of Labour - Specialisation of workers on specific tasks in the production process. Specialisation - The process of breaking down the production process into steps and then each worker is assigned a step. This would then increase labour productivity (Output per Worker). Barter - An exchange of goods/services for other goods/services. - Does not involve money. - Double coincidence of wants. Money - Anything which is acceptable to a wide number of people and organisations as payment for goods and services. Free Market Economy - Where all resources are privately owned and allocated via the price mechanism. There is minimal government intervention. Command Economy - Where there is public ownership of resources and these are allocated by the government. Mixed Economy - Where some resources are owned and allocated by the private sector and some by the public sector. Market - A channel where goods and services are exchanged. Utility - The capacity of a good or service to satisfy some human want. 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 goods or services that will be bought at any given price over a period of time. Demand Curve - Shows the quantity of a good or service that would be bought over a range of different price levels in a given period of time. Slopes downward - Price and Quantity have an inverse (negative) relationship.