Microeconomics
Year 1 Revision Guide
1
, Contents
Page 4 – 14 – Key terms
Page 15 – 27 – Diagrams
Page 28 – 29 – Formulas
Page 30 – What is economics? Positive and normative statements, Needs and Wants
Page 31 – Economic resources, factors of production, capital and consumer goods,
economic welfare
Page 32 – The environment as a scarce resource, the fundamental economic problem,
opportunity cost
Page 33 – Production possibility frontiers, productive and allocative efficiency
Page 34 – Law of demand, contraction and extension of demand
Page 35 – Conditions of demand, normal and inferior goods
Page 36 – Exceptions to the law of demand: speculative demand, Veblen goods, imperfect
information
Page 37 – 39 – Price elasticity, Income elasticity, Cross elasticity of demand
Page 40 – How businesses can use price elasticity to maximise revenue
Page 41 – Supply, supply curve, shifts in supply
Page 42-43 – Impact of taxes and subsidies on supply
Page 43 – Factors influencing the price elasticity of supply
Page 44 – Equilibrium price, excess demand, excess supply
Page 44-45 – How different markets interrelate with each other
Page 46 – 47 – Specific markets: agriculture, commodity, second hand cars, health,
housing
Page 48 – Specialisation, division of labour, costs of production, fixed and variable costs
Page 49 – 53 – Cost curves, economies and diseconomies of scale
Page 53 – Average revenue, total revenue and profit
Page 54 – Perfect competition, imperfect competition, monopoly
2
,Page 55 – Objectives of firms
Page 55 – 56 Profit maximisation in perfect competition
Page 56 – The ‘invisible hand
Page 57 – Consumer and producer sovereignty
Page 58 – 60 – Causes of monopoly status and power
Page 61 – Concentration ratios
Page 61 – 62 –Arguments for and against monopoly power
Page 62 –63 Pricing strategies: limit, predatory, special offer
Page 63 –64 The functions of price: rationing, incentives, allocative, signalling
Page 64 – 72 – Market failure: Public goods, merit goods, demerit goods, positive
externalities, negative externalities, Labour immobility, equity and inequity
Page 73 – 75 – Government intervention and government failure
Page 76 – Exam tips
3
, KEY TERMS
Positive statement a statement of fact that can be scientifically tested to prove
it to be correct or incorrect.
Normative statement a statement that includes a value judgement and cannot
be proven incorrect, as it cannot be tested.
Need term used to describe something which is necessary for survival
Want term used to describe something which is desired, but not essential
Economic Welfare the economic well-being of an individual or group in
society, or the country as a whole
Production the process of converting resources into output of goods
Capital/producer good a good used to complete the production process
Consumer good consumed by individuals to satisfy needs or wants
Factors of production these are the different inputs required in the production
process: land, labour, enterprise and capital
Finite/non-renewable resources are scarce and run out
Renewable resources as long as these are carefully managed; they can be
renewed as they are used
Fundamental economic problem how to allocate scarce resources among
different uses to maximise welfare
Scarcity people have unlimited wants, but resources available to produce the
goods to meet these wants ARE limited
Opportunity cost the cost of giving up the next best alternative foregone
4
Year 1 Revision Guide
1
, Contents
Page 4 – 14 – Key terms
Page 15 – 27 – Diagrams
Page 28 – 29 – Formulas
Page 30 – What is economics? Positive and normative statements, Needs and Wants
Page 31 – Economic resources, factors of production, capital and consumer goods,
economic welfare
Page 32 – The environment as a scarce resource, the fundamental economic problem,
opportunity cost
Page 33 – Production possibility frontiers, productive and allocative efficiency
Page 34 – Law of demand, contraction and extension of demand
Page 35 – Conditions of demand, normal and inferior goods
Page 36 – Exceptions to the law of demand: speculative demand, Veblen goods, imperfect
information
Page 37 – 39 – Price elasticity, Income elasticity, Cross elasticity of demand
Page 40 – How businesses can use price elasticity to maximise revenue
Page 41 – Supply, supply curve, shifts in supply
Page 42-43 – Impact of taxes and subsidies on supply
Page 43 – Factors influencing the price elasticity of supply
Page 44 – Equilibrium price, excess demand, excess supply
Page 44-45 – How different markets interrelate with each other
Page 46 – 47 – Specific markets: agriculture, commodity, second hand cars, health,
housing
Page 48 – Specialisation, division of labour, costs of production, fixed and variable costs
Page 49 – 53 – Cost curves, economies and diseconomies of scale
Page 53 – Average revenue, total revenue and profit
Page 54 – Perfect competition, imperfect competition, monopoly
2
,Page 55 – Objectives of firms
Page 55 – 56 Profit maximisation in perfect competition
Page 56 – The ‘invisible hand
Page 57 – Consumer and producer sovereignty
Page 58 – 60 – Causes of monopoly status and power
Page 61 – Concentration ratios
Page 61 – 62 –Arguments for and against monopoly power
Page 62 –63 Pricing strategies: limit, predatory, special offer
Page 63 –64 The functions of price: rationing, incentives, allocative, signalling
Page 64 – 72 – Market failure: Public goods, merit goods, demerit goods, positive
externalities, negative externalities, Labour immobility, equity and inequity
Page 73 – 75 – Government intervention and government failure
Page 76 – Exam tips
3
, KEY TERMS
Positive statement a statement of fact that can be scientifically tested to prove
it to be correct or incorrect.
Normative statement a statement that includes a value judgement and cannot
be proven incorrect, as it cannot be tested.
Need term used to describe something which is necessary for survival
Want term used to describe something which is desired, but not essential
Economic Welfare the economic well-being of an individual or group in
society, or the country as a whole
Production the process of converting resources into output of goods
Capital/producer good a good used to complete the production process
Consumer good consumed by individuals to satisfy needs or wants
Factors of production these are the different inputs required in the production
process: land, labour, enterprise and capital
Finite/non-renewable resources are scarce and run out
Renewable resources as long as these are carefully managed; they can be
renewed as they are used
Fundamental economic problem how to allocate scarce resources among
different uses to maximise welfare
Scarcity people have unlimited wants, but resources available to produce the
goods to meet these wants ARE limited
Opportunity cost the cost of giving up the next best alternative foregone
4
