SECTION A:
Human Want: Something that people desire but don’t require for survival.
● For example, excessive clothing, cinema tickets.
Human Need: Something that is a basic requirement for human survival.
● For example, water and food.
Scarcity: The basic economic problem that arises because people have unlimited wants, but
resources are limited. These resources are referred to as the four factors of production:
C.E.L.L (Capital, Enterprise, Land and Labour)
Opportunity The value of the next best alternative forgone.
Cost: ● This cost arises because a sacrifice has to be made due to the finite amount of
resources. We choose our decisions in order of
preference and the one not chosen is the next best
alternative.
This is how we show this in a diagram. This point
drawn will move from from A to B. The difference is
the opportunity cost. You subtract the biggest value
by the second most big to get the opportunity cost.
When going from point A to B, the opportunity
cost is 1. From A to C, 5.
Consumer: A person who purchases goods and services for personal use.
● They purchase things like food, clothes and entertainment.
Producer: An entity who supplies goods and services for the use of others.
● They purchase things like employees and raw materials.
Government: The group of people with the authority to govern a country or state.
● They purchase things like schools and hospitals.
Factors of C- Capital (Things we need to make other things)
Production: E- Enterprise (The ideas and the ways things work)
L- Land (The land and everything utilised on it)
L- Labour (The employees and workers)
The quantity and quality of these factors can affect the potential output of their
economy.
Potential The most that an economy could possibly produce if they were to use all their factors of
Output: production efficiently.
, ● In point C, the economy is not using all its
resources to their full potential output, as it is below
the PPF. It has not fully utilised all its factors of
production.
● In point D, the economy cannot produce
because it is away from the possibilities of the PPF
and is above its productive capacity. The economy
does not have enough resources to produce beyond
its PPF.
● In point A and B, the economy is using all
its resources to their full potential, fully utilising all the production factors
efficiently.
Production The maximum potential output to good services in a economy, given all factors of
Possibility production are fully and efficiently employed.
Frontier
(PPF): It is illustrated in a diagram as a curved
[Or PPC - line and anything outside the boundaries is
Production not possible with the resources given a
Possibility
Curve] certain time. Anything below the frontier
means it has not been used to its
productive capacity, and could be
utilised more efficiently.
When an economy moves from one point
(A) to another (B) it means that a
opportunity cost has occurred.
When a PPF changes it’s potential output
has changed. Potential output is affected by the factors of production (CELL).
What can cause potential output to What can cause potential output to
increase? (economic growth) decrease?
● Increases in the QQFoP ● Something that affects the
● Immigration (Labour Force, QQFoP
quantity) ● Natural Disasters
● Increase in capital goods ● Disease
● Increase in quality of labour ● Emmigration
(Labour force, quality) ● Decrease in demand for goods
● Technological innovation ● Lack of stable law and democracy
● Rising demand for good and
services
● Stable law and democracy
, When the potential output of an economy increases with economic growth, the PPF will
expand, allowing more points and allowing the country to go further to utilise its
factors of production, but will also allow the economy to make more money. This is vice
versa when the potential output decreases.
QQFoP: Quantity and quality of factors of production (CELL): affects the potential output of an
economy.
Productive Maximum possible output of an economy given all factors of production are fully and
Capacity: efficiently employed.
If an economy is operating below the PPF it is operating below its productive capacity.
If an economy is operating on the PPF it is operating at its productive capacity.
Capital Goods that are used in producing other goods, rather than beings bought by consumers.
Goods: ● (E.g Raw materials)
Consumer Goods that satisfy human needs or wants through their direct consumption.
Goods: ● (E.g foods, stationary, clothes)
When we decrease the amount of consumer goods on a PPF:
● Prices may increase (due to lack of goods).
● Living standards will decrease because of the lower supply of consumer goods.
● Supply will decrease (but demand will stay the same).
● This will lead to an increase in cost.
● Long run: more consumer goods will be made by the newly made capital goods.
Economic An increase in the total value of goods and services produced by an economy in a period.
Growth: On a PPF with consumer and capital goods, we have to consider two things: the short and
long run.
● Short run: Less consumer goods will be made and it slows growth.
● Long run: May lead to an i ncrease of economic growth because of utilising
newly made capital goods.
Public Sector: When goods and services are provided to the public sector, a range of organisations such
as government departments, public corporations and other agencies, provide services
that are often neglected by the private sector.
● (E.g Education, healthcare and defence).
● Most are provided free by the state and are paid from tax revenue or borrowing.
Private When goods and services are provided to the private sector, individuals or groups of
Sector: individuals are free to set up businesses and supply goods and services to anyone that
wants to buy them.
Efficiency in Economies want to be the most productive and efficient they possibly can be.
economies: ● Producing goods at the lowest cost possible.
● Minimising the quantity of resources that are needed to produce goods.
● Only producing those goods that are needed by consumers.
Human Want: Something that people desire but don’t require for survival.
● For example, excessive clothing, cinema tickets.
Human Need: Something that is a basic requirement for human survival.
● For example, water and food.
Scarcity: The basic economic problem that arises because people have unlimited wants, but
resources are limited. These resources are referred to as the four factors of production:
C.E.L.L (Capital, Enterprise, Land and Labour)
Opportunity The value of the next best alternative forgone.
Cost: ● This cost arises because a sacrifice has to be made due to the finite amount of
resources. We choose our decisions in order of
preference and the one not chosen is the next best
alternative.
This is how we show this in a diagram. This point
drawn will move from from A to B. The difference is
the opportunity cost. You subtract the biggest value
by the second most big to get the opportunity cost.
When going from point A to B, the opportunity
cost is 1. From A to C, 5.
Consumer: A person who purchases goods and services for personal use.
● They purchase things like food, clothes and entertainment.
Producer: An entity who supplies goods and services for the use of others.
● They purchase things like employees and raw materials.
Government: The group of people with the authority to govern a country or state.
● They purchase things like schools and hospitals.
Factors of C- Capital (Things we need to make other things)
Production: E- Enterprise (The ideas and the ways things work)
L- Land (The land and everything utilised on it)
L- Labour (The employees and workers)
The quantity and quality of these factors can affect the potential output of their
economy.
Potential The most that an economy could possibly produce if they were to use all their factors of
Output: production efficiently.
, ● In point C, the economy is not using all its
resources to their full potential output, as it is below
the PPF. It has not fully utilised all its factors of
production.
● In point D, the economy cannot produce
because it is away from the possibilities of the PPF
and is above its productive capacity. The economy
does not have enough resources to produce beyond
its PPF.
● In point A and B, the economy is using all
its resources to their full potential, fully utilising all the production factors
efficiently.
Production The maximum potential output to good services in a economy, given all factors of
Possibility production are fully and efficiently employed.
Frontier
(PPF): It is illustrated in a diagram as a curved
[Or PPC - line and anything outside the boundaries is
Production not possible with the resources given a
Possibility
Curve] certain time. Anything below the frontier
means it has not been used to its
productive capacity, and could be
utilised more efficiently.
When an economy moves from one point
(A) to another (B) it means that a
opportunity cost has occurred.
When a PPF changes it’s potential output
has changed. Potential output is affected by the factors of production (CELL).
What can cause potential output to What can cause potential output to
increase? (economic growth) decrease?
● Increases in the QQFoP ● Something that affects the
● Immigration (Labour Force, QQFoP
quantity) ● Natural Disasters
● Increase in capital goods ● Disease
● Increase in quality of labour ● Emmigration
(Labour force, quality) ● Decrease in demand for goods
● Technological innovation ● Lack of stable law and democracy
● Rising demand for good and
services
● Stable law and democracy
, When the potential output of an economy increases with economic growth, the PPF will
expand, allowing more points and allowing the country to go further to utilise its
factors of production, but will also allow the economy to make more money. This is vice
versa when the potential output decreases.
QQFoP: Quantity and quality of factors of production (CELL): affects the potential output of an
economy.
Productive Maximum possible output of an economy given all factors of production are fully and
Capacity: efficiently employed.
If an economy is operating below the PPF it is operating below its productive capacity.
If an economy is operating on the PPF it is operating at its productive capacity.
Capital Goods that are used in producing other goods, rather than beings bought by consumers.
Goods: ● (E.g Raw materials)
Consumer Goods that satisfy human needs or wants through their direct consumption.
Goods: ● (E.g foods, stationary, clothes)
When we decrease the amount of consumer goods on a PPF:
● Prices may increase (due to lack of goods).
● Living standards will decrease because of the lower supply of consumer goods.
● Supply will decrease (but demand will stay the same).
● This will lead to an increase in cost.
● Long run: more consumer goods will be made by the newly made capital goods.
Economic An increase in the total value of goods and services produced by an economy in a period.
Growth: On a PPF with consumer and capital goods, we have to consider two things: the short and
long run.
● Short run: Less consumer goods will be made and it slows growth.
● Long run: May lead to an i ncrease of economic growth because of utilising
newly made capital goods.
Public Sector: When goods and services are provided to the public sector, a range of organisations such
as government departments, public corporations and other agencies, provide services
that are often neglected by the private sector.
● (E.g Education, healthcare and defence).
● Most are provided free by the state and are paid from tax revenue or borrowing.
Private When goods and services are provided to the private sector, individuals or groups of
Sector: individuals are free to set up businesses and supply goods and services to anyone that
wants to buy them.
Efficiency in Economies want to be the most productive and efficient they possibly can be.
economies: ● Producing goods at the lowest cost possible.
● Minimising the quantity of resources that are needed to produce goods.
● Only producing those goods that are needed by consumers.
