Economics Notes - Cambridge IGCSE and O Level
Policies to alleviate poverty and redistribute income include improving education, providing more generous state benefits, using progressive taxation, and introducing/increasing a national minimum wage.
Opportunity cost is defined as the cost of the next best opportunity forgone when making economic decisions, and examples are provided.
US federal government spending in 2017 had the following distribution:
42.2\% on labour and social affairs
11.1\% on national defence
8.2\% on transport and digital infrastructure
6.1\% on federal debts
5.3\% on education and research
4.6\% on healthcare
Opportunity cost influences decision making for consumers, workers, producers and governments by economic return.
Production possibility curve (PPC) shows the maximum combination of goods & services that can be produced in an economy, the productive capacity.
Movements along the curve: All resources are used efficiently, resulting in an opportunity cost. This means that to produce more of one product, there must be less of another product.
Shifts of the curve: Can come about in the following way:
An increase in the quality of factors of production
An increase in the quantity of factors of production
Microeconomics studies particular markets and sections of the economy, focusing on economic factors affecting choices and changes in these factors on decision makers.
Macroeconomics studies economic behavior and decision making in the whole economy, using aggregate variables like national output and inflation.
Chapter covers microeconomic and macroeconomic decision makers.
The market system allocates resources through demand and supply, establishing market equilibrium.
All economies utilize the market system to address three key economics questions: 'What production should take place?' 'How should it take place?' and 'For whom should it take place?'
The price mechanism uses demand and supply to allocate resources without government intervention; allocation is based on price, factor resources are allocated based on financial incentives, and competition encourages choice.
Demand is both the willingness and ability of customers to pay a price for a service with an inverse relationship between price and quantity demanded.
This is a contraction in demand which means a fall caused by an increase in price, a key determinant of the level of demand.
An extension in quantity to extend on demand which means and increase caused by reduction in price of a service.
Shift in demand caused by changes in non-price factors that affect demand, such as consumer incomes.
Supply is the ability and willingness of firms to provide goods and services at given price levels with a positive correlation between price and quantity supplied.
TWO TIPS is used for determinents of supply. Time, Weather, Opportunity costs, Taxes, Innovations, Production costs and Subsidies.
There is an upward sloping movement along the supply curve due to the correlation of price and product.
Changes in a non-price factor of affect the level of supply will cause shift in the supply curve.
Market equilibrium is when demand is equal to the supply of a product, whereas market disequilibrium occurs when the prices are either to high or low.
Surplus is created when supply exceed demands.
Price changes also occur due to a change of a non-price factor.
Price elasticity of demand (PED) measures the degree of responsiveness of the quantity demanded of a product and price changes.
If the PED for a product is equal to infinity (∝) then demand is perfectly price elastic with customers switching to by other subsitute products if there's a price rise.
Determinatns of the price of elasticity of demand can be remembered by THIS, Time, Habits, Income and subsitutes.
Price Elasticitiy of supply (PES) can be > 1 or <, =0, =∝