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microeconomics
MICRO1.1.1 economics as a social science
economics - the study of human behaviour under scarcity
scarcity - FoP finite but wants are unlimited
ceteris paribus - all other factors assumed constant
economic agents
consumers (demand G+S)
producers (supply G+S)
government (tax and distribute G+S to both)
secondary agents
workers charities
regulators/ shareholders households
1.1.2 positive and normative statements
positive statements - can be tested true or false + objective
normative statements - based on value judgements, subjective and cant be tested
1.1.3 the economic problem
opportunity cost - the value foregone of the next best alternative only (result of trade off)
FoP - elements required to produce G+S
capital, enterprise, land, labour
rewards/prices (profit, salary, rent, wages)
FoP can be divided into physical (land) and human (labour, enterprise)
1.1.4 production possibility frontier
PPF - represents all combinations of max output that can be produced when all FoP fully employed
productive efficiency - where it isnt possible to produce ore of one good without reducing the production of another
all FoP used up so they must be transfered to make new goods
PPF x and y axis can only be outputs (finished goods) not inputs like enterprise or land
capital can be either
an economys output is constrained by FoP, leading to a trade of where production of one has an opportunity cost
in linear ppfs, the oc remains constant
in curved ppfs, moc increases
in linear ppfs there is a 1:1 loss gain ratio (constant marginal oc)
an economy will only be able to produce more if the quantity or quality of FoP increase
this shows econ growth
limits of the PPF model
1:1 ratio is oversimplified
FoPP assumed to be unspecialised and transfered with no change
microeconomics 1
, points on the curve are productively efficient
points under the curve are productively ineffcient
points above the curve are unattainable
intertemporal trade off
trade off between consumer and capital goods
option 1
increased consumption (making consumer goods)
low capital production means less growth in future so PPF likely to shrink
option 2
increased investment (production of capital goods)
more efficient production and more growth in future means PPF likely to expand
1.1.5 specialization and division of labour
specialisation - the process of concentrating on a particular area
division of labour - assigning different tasks to different workers to improve productivity
productivity - output ÷ input
division of labour
advantages
workers become more productive and develop increased skills and knowledge)
production and profit increases (output then revenue increase and increased efficiency so COP decrease)
specialised workers can get higher pay
disadvantages
workers may become demotivated and less efficient due to repetitive mundane work)
overspecialisation leaves workers vulnerable to structural unemployment
greater cost of training workers
1.1.5.d functions of money
functions of money
medium of exchange - money as an intermediary between buyer and seller
measure of value - money measures the value of goods/services/ work
store of value - money can be saved to spend later
means of deferred payment - “buy now, pay later” function
barter - trading G+S between people
why is bartering inefficient
exchange involves double coincidence of wants (both people want something from the other)
difficult to determine value of goods
hard to find someone who matches wants
trade, specialisation and money
specialisation means country produces on thing
countries must trade with each other to get range of G+S
trading requires money that fills 4 functions
1.1.6 types of economies
command economy - production, investment, prices and income determined centrally by govt bureaucrats
supported by marx
microeconomics 2
microeconomics
MICRO1.1.1 economics as a social science
economics - the study of human behaviour under scarcity
scarcity - FoP finite but wants are unlimited
ceteris paribus - all other factors assumed constant
economic agents
consumers (demand G+S)
producers (supply G+S)
government (tax and distribute G+S to both)
secondary agents
workers charities
regulators/ shareholders households
1.1.2 positive and normative statements
positive statements - can be tested true or false + objective
normative statements - based on value judgements, subjective and cant be tested
1.1.3 the economic problem
opportunity cost - the value foregone of the next best alternative only (result of trade off)
FoP - elements required to produce G+S
capital, enterprise, land, labour
rewards/prices (profit, salary, rent, wages)
FoP can be divided into physical (land) and human (labour, enterprise)
1.1.4 production possibility frontier
PPF - represents all combinations of max output that can be produced when all FoP fully employed
productive efficiency - where it isnt possible to produce ore of one good without reducing the production of another
all FoP used up so they must be transfered to make new goods
PPF x and y axis can only be outputs (finished goods) not inputs like enterprise or land
capital can be either
an economys output is constrained by FoP, leading to a trade of where production of one has an opportunity cost
in linear ppfs, the oc remains constant
in curved ppfs, moc increases
in linear ppfs there is a 1:1 loss gain ratio (constant marginal oc)
an economy will only be able to produce more if the quantity or quality of FoP increase
this shows econ growth
limits of the PPF model
1:1 ratio is oversimplified
FoPP assumed to be unspecialised and transfered with no change
microeconomics 1
, points on the curve are productively efficient
points under the curve are productively ineffcient
points above the curve are unattainable
intertemporal trade off
trade off between consumer and capital goods
option 1
increased consumption (making consumer goods)
low capital production means less growth in future so PPF likely to shrink
option 2
increased investment (production of capital goods)
more efficient production and more growth in future means PPF likely to expand
1.1.5 specialization and division of labour
specialisation - the process of concentrating on a particular area
division of labour - assigning different tasks to different workers to improve productivity
productivity - output ÷ input
division of labour
advantages
workers become more productive and develop increased skills and knowledge)
production and profit increases (output then revenue increase and increased efficiency so COP decrease)
specialised workers can get higher pay
disadvantages
workers may become demotivated and less efficient due to repetitive mundane work)
overspecialisation leaves workers vulnerable to structural unemployment
greater cost of training workers
1.1.5.d functions of money
functions of money
medium of exchange - money as an intermediary between buyer and seller
measure of value - money measures the value of goods/services/ work
store of value - money can be saved to spend later
means of deferred payment - “buy now, pay later” function
barter - trading G+S between people
why is bartering inefficient
exchange involves double coincidence of wants (both people want something from the other)
difficult to determine value of goods
hard to find someone who matches wants
trade, specialisation and money
specialisation means country produces on thing
countries must trade with each other to get range of G+S
trading requires money that fills 4 functions
1.1.6 types of economies
command economy - production, investment, prices and income determined centrally by govt bureaucrats
supported by marx
microeconomics 2
