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picture1_Igcse Economics Notes Pdf 128254 | Caie Igcse Economics 0455 Theory V3


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File: Igcse Economics Notes Pdf 128254 | Caie Igcse Economics 0455 Theory V3
znotes org updated to 2020 22 syllabus caie igcse economics 0455 summarized notes on the syllabus caie igcse economics 0455 could have earned interest by leaving 10 000 dollars in ...

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   ZNOTES.ORG
   UPDATED TO 2020-22 SYLLABUS
   CAIE IGCSE
   ECONOMICS 
   (0455)
   SUMMARIZED NOTES ON THE SYLLABUS
   CAIE IGCSE ECONOMICS (0455)
                                                  Could have earned interest by leaving $10,000 dollars
                                                  in bank account instead
     1. The Basic Economic
                                                  Opportunity cost of decision to invest in stock is the
                                                  value of the potential interest
     Problem
                                                Example 2: A city decides to build a hospital on vacant
                                                land it owns
                                                  Could have built school or sports centre
     1.1. Economic Problem
                                                  Opportunity cost is the value of the benets forgone of
                                                  the next best thing which could have been done
       There are too few productive resources to make all the
       goods and services that consumers need and want.
       Unlimited wants and limited resources  1.4. Production Possibility Curves&
       Scarcity of resources is the basic economic problem
                                              Choice
      
                                                Opportunity cost can be shown using a production
                                                possibility curve (PPFC)
     Types of goods
                                                It shows the maximum combinations of goods and
                                                services that can be produced by an economy in each
       Economic goods: A good or service that has a degree of
                                                period of time with its limited resources
       scarcity and therefore an opportunity cost.
                                                A PPC shows all the combinations of possibilities, involving
       Free goods: A good or service that is not scarce and is
                                                two goods or options
       available in abundance. For example, the air we breathe.
                                                Each combination is a choice
                                                An economy can use all its scarce resources to produce
     1.2. Factors of Production
                                                this combination
                                                A point within the curve signies like X, represents
       Consumers are people or rms who need and want goods
                                                ineciency
       and services
                                                A point outside the curve like Y, represents combinations
       Resources or factors of production are used to make
                                                that cannot be produced due to the lack of resources
       goods and services
                      LLCE
       Land: natural resources used in production (e.g. land)
       Labour: human eort used in production of
       goods/services (e.g. workers)
       Capital: the man-made resources that are used to
       produce goods/services (e.g. tractor)
       Enterprise: the skills and willingness to take the risks
       required to organize productive activities
       Entrepreneurs organize and combine resources in rms
       to produce goods and services
       Durable consumer goods last long while (e.g. furniture)
       non-durable consumer goods (e.g. food) do not
       Capital goods and semi-nished goods or components
       are used up in production
     1.3. Opportunity Cost
                                              2. Allocation of Resources
       Opportunity cost is the cost of choosing between
                                              2.1. Microeconomics and
       alternative uses of resources
       Choosing one use will always mean giving up the
                                              Macroeconomics
       opportunity to use resources in another way, & the loss of
       goods & services they might have produced instead
                                              Microeconomics
       Problem of resource allocation is choosing how best to
       use limited resources to satisfy as many needs and wants
                                                It is the study of particular markets, and segments of the
       as possible and maximize economic welfare
                                                economy. It looks at issues such as consumer behaviour,
       Economics aims to nd most ecient resource allocation
                                                individual labour markets, and the theory of rms.
       Example 1: A person invests $10,000 in a stock
   WWW.ZNOTES.ORG
                        CAIE IGCSE ECONOMICS (0455)
                                                           It involves supply and demand in individual markets,
                                                           Individual consumer behaviour, and individual labour
                                                           markets
                                        
                                       Macroeconomics
                                                           Study of the whole economy. It looks at ‘aggregate’
                                                           variables, such as aggregate demand, national output and
                                                           ination.
                                                           Involves decisions made by the government regarding, for
                                                           example, policies
                                       2.2. The role of markets in allocating
                                       resources                                                                                                                                                                                                                                                                                                                                                                             Higher price of good = less people demand that good, hence,
                                                                                                                                                                                                                                                                                                                                                                                                                             demand is inversely related to price
                                       The Market System
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                1
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Price ∝                                                                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Demand
                                                           A market economy is an economic system in which
                                                           economic decisions and the pricing of goods and services
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Factors that aect demand
                                                           are guided by the interactions of supply and demand- the
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Price
                                                           market mechanism
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Consumer tastes/preferences
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Consumer Income
                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Prices of substitute/ complementary goods
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Interest rates (price of borrowing money)
                                       Key Resources Allocation Decisions
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Consumer population (population increase = demand
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     increase)
                                       The basic economic problem of scarcity creates three key
                                                                                                                                                                                                                                                                                                                                                                                                                                                 The individual demand is the demand of one individual or
                                       questions
                                                                                                                                                                                                                                                                                                                                                                                                                                                 rm
                                                                                                                                                                                                                                                                                                                                                                                                                                                 The market demand represents the aggregate of all
                                                           What to produce?
                                                                                                                                                                                                                                                                                                                                                                                                                                                 individual demands
                                                           How to produce?
                                                           For whom to produce?
                                                                                                                                                                                                                                                                                                                                                                                                                             2.4. Supply
                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Supply represents how much the market can oer
                                       Introduction to the Price mechanism
                                                           It aids the resource allocation decision making process.
                                                           The decision is made at the equilibrium point where
                                                           supply and demand meet
                                       2.3. Demand
                                                           Demand refers to how much of a product or service is
                                                           desired by buyers
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Higher price of good = higher quantity supplied, hence
                                                                                                                                                                                                                                                                                                                                                                                                                                                 quantity is directly proportional to price
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Price ∝ Quantity supplied
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Factors that aect supply
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Cost of factors of production
                        WWW.ZNOTES.ORG
                        CAIE IGCSE ECONOMICS (0455)
                                                                               Prices of other goods/services
                                                                                                                                                                                                                                                                                                                                                                                                                             2.5. Price Elasticity of Demand
                                                                               Global factors
                                                                               Technology advances
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Denition: The responsiveness of demand to a change in
                                                                               Business optimism/expectations
                                                                                                                                                                                                                                                                                                                                                                                                                                                 price
                                                           The individual supply is the supply of an individual
                                                           producer
                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Inelastic Demand                                                                                                                                                                Elastic Demand
                                                           The market supply is the aggregate of the supply of all
                                                                                                                                                                                                                                                                                                                                                                                                                                                                   PED lower than 1                                                                                                                                                      PED greater than 1
                                                           rms in the market
                                                                                                                                                                                                                                                                                                                                                                                                                                    The necessity of the product
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               The necessity of the product
                                                                                                                                                                                                                                                                                                                                                                                                                                     is high – it is either essential
                                       Price Determination
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   is relatively low
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     or habitual
                                       Market Equilibrium
                                                                                                                                                                                                                                                                                                                                                                                                                                          A change in price has little
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Demand would respond
                                                           When supply & demand are equal the economy is said to
                                                                                                                                                                                                                                                                                                                                                                                                                                                   eect on the change in
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                quickly and more drastically
                                                           be at equilibrium
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            demand
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        % change in quantity demanded
                                                                                                                                                                                                                                                                                                                                                                                                                                                                PED=                                                                                                                                                                                                                                                                             
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       % change in price
                                                                                                                                                                                                                                                                                                                                                                                                                                                 When demand is price inelastic:
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     An increase in price would raise revenue
                                                                                                                                                                                                                                                                                                                                                                                                                                                 When demand is price elastic:
                                                           At this point, the allocation of goods is at its most ecient
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     A decrease in price would raise revenue
                                                           because amount of goods being supplied is the same as
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Factors that aect PED:
                                                           amount of goods being demanded & everyone is satised
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     The number of substitutes
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     The period of time
                                       Market Disequilibrium
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     The proportion of income spent on the commodity
                                                                                      Excess Supply                                                                                                                                                         Excess Demand
                                                                                                                                                                                                                                                                                                                                                                                                                                                                     The necessity of the product
                                                                                                                                                                                                                                                                                                                                                                                                                             2.6. Price Elasticity of Supply
                                                                                                                                                                                                                                                                                                                                                                                                                                                 Denition: The responsiveness of quantity supplied to a
                                                                                                                                                                                                                                                                                                                                                                                                                                                 change in price
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Inelastic Supply                                                                                                                                                                Elastic Supply
                                                                                                                                                                                                                                                                                                                                                                                                                                                   It has a PES less than 1                                                                                                                                               It has a PES more than 1
                                                                                                                                                                                                                            When price is set below the
                                                      If the price is set too high,
                                                                                                                                                                                                                                                                                                                                                                                                                                A large price change will have A large price change will have
                                                                                                                                                                                                                                equilibrium price. Creates
                                             excess supply will be created
                                                                                                                                                                                                                                                                                                                                                                                                                                           little eect on the amount                                                                                                                                          a large eect on the amount
                                                                                                                                                                                                                                            demand that exceeds
                                           within the economy and there
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           supplied                                                                                                                                                                   supplied
                                                                                                                                                                                                                                  production due to the low
                                               will be allocative ineciency
                                                                                                                                                                                                                                                                                         price.
                                       Price Changes
                                       Causes of Price Changes
                                                           A change in supply
                                                           A change in demand
                                                           Consequences of Price Changes
                                                           An inward shift of the supply curve will increase prices
                                                           and vice versa                                                                                                                                                                                                                                                                                                                                                                                                                                                    % change in quantity supplied
                                                                                                                                                                                                                                                                                                                                                                                                                                                                        PES=                                                                                                                                                                                                                                                             
                                                           An inward shift of the demand curve will decrease prices
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     % change in price
                                                           and vice versa
                        WWW.ZNOTES.ORG
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...Znotes org updated to syllabus caie igcse economics summarized notes on the could have earned interest by leaving dollars in bank account instead basic economic opportunity cost of decision invest stock is value potential problem example a city decides build hospital vacant land it owns built school or sports centre benets forgone next best thing which been done there are too few productive resources make all goods and services that consumers need want unlimited wants limited production possibility curves scarcity choice can be shown using curve ppfc types shows maximum combinations produced an economy each good service has degree period time with its therefore ppc possibilities involving free not scarce two options available abundance for air we breathe combination use produce factors this point within signies like x represents people rms who ineciency outside y used cannot due lack llce natural e g labour human eort workers capital man made tractor enterprise skills willingness take ...

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