What is an economy?
An economy is a system which tries to balance the available resources of a country (land, labour, capital and enterprise) against the wants and needs of consumers.
➢ Scarcity is a situation that arises because people have unlimited wants in the face of limited resources.
➢ Opportunity cost in decision making is the value of the next best alternative forgone.
1. Market economy is one in which market forces are allowed to guide the allocation of resources within a society.
2. Planned economy is one in which the government undertakes the co-ordination role, planning and directing the allocation of resources.
3. Mixed economy is when market forces are complemented by some state intervention.
Factors of production:
The factors of production are:
3. Land .
Specialisation, exchange and division of labour:
Division of labour; a process whereby the production procedure is broken down into a sequence of stages, and workers are assigned to particular stages.
Principle of opportunity cost: in decision making, the value of the next-best alternative forgone.
Production Possibility Frontier/ Curves is a curve showing the maximum combinations of goods or services that can be produced in a set period of time given available resources.
Economic growth is an expansion in the productivity capacity of the economy. This can be shown o a production possibility curve by the curve shifting to the right.
The total output of an economy like the UK is measured by its gross domestic product, GDP.
A market is a set of arrangements that allows transactions to take place.
Determinants of demand and supply.
The law of demand states that there is an inverse relationship between quantity demanded and the price of a good or service.
Ceteris paribus is a Latin phrase meaning “other...