Igcse Economics Revision Notes

Basic Economic Problem: The basic economic problem is that there are finite resources and unlimited wants; in other words there are unlimited human wants, and resources which are used to make those goods are limited. The basic economic problem arises when wants are unlimited and resources are scarce.

Production Possibility Curve: The following is a curve representing all possible combinations of two goods that can be produced by an economy where all of its resources are fully and efficiently employed. Point X: The economy can exist at this point but it is being inefficient. Point X Is considered …

Resource Allocation Answers Three Questions: What to produce? How to produce? For whom to produce? Economic Systems: How an economy decides, how to allocate its resources is its economic system. There are three kinds of economic systems: Free Market Economy Planned Economy Mixed Economic System   Free Market Economy: It is …

Money: Money is an item which is generally acceptable as a means of payment. Characteristics of Money: General Acceptability: All people should readily accept it. Divisibility: Money materials can be easily divisible into small parts / units of different value, without losing its value. Portability: It can be easily transported …

Prices are determined through the forces of demand and supply of a product or service. Demand: It is the willingness and ability to buy a product / services at a given price over a given period of time.   Law Of Demand: The law of demand states that price is …

There are various factors other than price that change the Demand of a product or service and hence cause a shift in its Demand Curve. Income (Disposable Income): It is the income after income tax and national insurance contributions have been deducted. When income rises the purchasing power of people …

There are various factors other than price that change the Supply of a product or service and hence cause a shift in its Supply Curve. Cost of Production: Cost of production is the amount of money used in producing a good. It might change due to the changes in the …

Price Elasticity Of Demand, measures the responsiveness of demand to a change in price. The formula used to calculate (PED) is: Q1 = Old Quantity Q2 = New Quantity P1 = Old Price P2 = New Price If the answer using the above formula is less than 1 than the …

Price Elasticity Of Supply, is the measure of the responsiveness of supply to a change in price. The Formula used to calculate Price Elasticity Of Supply is: Q1 = Old Quantity Q2 = New Quantity P1 = Old Price P2 = New Price   If the answer using the above …

Knowledge of Price Elasticity would help the producer in many ways while making a decision such as: Pricing Policy: The knowledge of price elasticity might help a producer to analyze the impact of changes in price levels on the demand for its product and consequently on its revenue. The producers …