Economics - Ujian Sekolah

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What is scarcity

A situation where there is not enough to satisfy everyone’s wants

What is the economic problem

Unlimited wants exceeding finite resources

Factors of production (4)

• Land: gifts of nature available for production (most immobile)

• Labour: Human effort used in producing goods and services

• Capital: Human made goods used to produce other goods and services

• Enterprise: The willingness and ability to bear uncertain risks and to make decisions in a business (most mobile)

What is Opportunity cost

The loss of the next best alternatve

What is a production possibility curve (PPC)

A curve that shows the maximum output of two types of products that a country can generate if it uses all of its factors of production.

A movement in the PPC occurs when

When there is any change in the allocation of existing resources within an economy

Microeconomics

The study of individual markets & sections of the economy. It examines the different choices individuals, households & firms make and what factors influence their choices.

Macroeconomics

The study of economic behaviour & decision making in the entire economy. It examines the role of the government in achieving economic growth & human development through the implementation of specific government policies

Questions that economies faces (3)

• What to produce

• How to produce

• Who is the receive the products produced

Demand

The amount of a good/service that a consumer is willing & able to purchase at a given price in a given time period

What is this?

Extension in demand

What is this?

Contraction in demand

What causes movement along the demand curve?

The price, which is the only factor that changes (this causes a change in quantity demanded)

• Contraction = Increase in price, decrease in QD

• Extension = Decrease in price, increase in QD

Example of movement along the demand curve

What is this?

Decrease in demand

What causes the entire demand curve to shift?

Conditions of demand (irrespective of the price level)

• Advertising campaigns

• Changes in population

• Changes in taste and fashion

  Etc.

Example of shift of the demand curve

D1 → increase

D2 → decrease

Supply

The amount of a good/service that a producer is willing & able to supply at a given price in a given time period.

• The supply curve is sloping upward as there is a positive relationship

What is this?

Contraction in supply

What is this?

Extension in supply

What causes movement along the supply curve?

Price (the only factor), there will be a change in QS (quantity supplied)

• Extension = Increase in price, increase in QS

• Contraction = Decrease in price, decrease in QS

Example of movement along a supply curve

What is this?

Increase in supply

What is this?

Decrease in supply

What causes the entire supply curve to shift

Conditions of supply (irrespective of the price level)

• Change in cost of production

• Improvements in technology

• Taxes

• Subsidy

• Conditions (health of livestock, crops, weather)

• Prices of other products

• Disasters and wars

• Discoveries and depletions of commodities

Example of shift of the supply curve

S1 → Decrease

S2 → Increase

What is equilibrium

Demand = Supply

What is market disequilibrium?

Demand ≠ Supply

Shortage

Excess demand (supply cannot keep up)

Surplus

Excess supply (demand cannot keep up)

Price elasticity of demand (PED)

Price elasticity of demand measures how responsive the change in quantity demanded is to a change in price

• The PED value will always be negative so economists ignore the sign and present the answer as positive.

PED formula

PED values (The PED value will always be negative so economists ignore the sign and present the answer as positive)

Price elasticity of supply (PES)

Price elasticity of supply (PES) measures how responsive the change in quantity supplied is to a change in price

PES formula

PES value

What is a market economy

A market economy/free market economy is an economy that has no (little) government intervention in the allocation of resources & distribution of goods/services

Types of economy

Public sector

The part of the economy controlled by the goverment

Private sector

Covers business organisations which are owned by shareholders and individual

Advantage and disadvantages of market economy