C1 Basic economic problem
Scarcity
Basic economic problem: scarcity -> choice ->opportunity cost
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Level of scarcity could be reduced, but never be solved.
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Short Run: labour can vary;
Long Run: all fops can vary;
Very long Run: Technology can vary
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Ceteris paribus
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PPC
Move along the PPC: opportunity cost
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Shift of ppc: economic growth.
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Move towards PPC: reduce in unemployment
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Factors of production
Role of enterprise: organize other three fops and takerisk.
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Economic systems
Transition: Planned -> market
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Short term: Price rises, unemployment rises (nowoff-syllabus)
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Positive/Normative Statements
Positvive: objective, factual can be tested
Normative: subjective, factual cannot be tested
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Money and division of labour
Money cannot function: Unlimited supply / Hyperinflation
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Money is not a factor of production
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Money dose not have intrinsic value
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Money is essential for the operation of division of labour
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Classification of goods
Economic goods: goods with opportunity cost
Free goods: zero opportunity cost (air)
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Public goods: law enforcement, defence, radio,streetlight
Quasi-public goods: TV(excludable)
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C2 Markets
Demand
Construction of market demandcurve: summation of all the individual demand curve at each price
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Move along demand curve: price change; supply shift
Shift of demand curve: taste; income; population; priceof substitutes/complements
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Supply
Construction of market supplycurve: summation of all the individual supply curve at each price
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Move along supply curve: price change; demand shift
Shift of supply curve: cost of production change
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Price
Equilibrium price: QD=QS
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Function of price: rationing, allocating, transmission of preferences
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PED
PED=0: Vertical line; PED=infinity: Horizontal line; PED=-1:Hyperbola
The value of PED is a range; if PED=-1, total revenue isconstant.
PED decrease along straight demand curve
Factors affecting PED: subsitutes; proportion of income; habit;luxury or necessity
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PES
PES=0: Vertical line; PES=infinity: Horizontal line; PES=1:S through the origin
PES>1, S through positive y-axis,PES decreases towards1 when quantity increases;
PES0: normal goods
YED0: substitutes
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