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Economics Complete Revision Notes

The document provides comprehensive economics revision notes covering the basic economic problem of scarcity, factors of production, opportunity cost, and production possibility curves. It also distinguishes between microeconomics and macroeconomics, outlines the roles of money and banking, and discusses government policies and economic development. Additionally, it addresses international trade concepts such as specialization, free trade, and exchange rates.

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10 views

Economics Complete Revision Notes

The document provides comprehensive economics revision notes covering the basic economic problem of scarcity, factors of production, opportunity cost, and production possibility curves. It also distinguishes between microeconomics and macroeconomics, outlines the roles of money and banking, and discusses government policies and economic development. Additionally, it addresses international trade concepts such as specialization, free trade, and exchange rates.

Uploaded by

jw2473517
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Economics Revision Notes

SECTION 1: The Basic Economic Problem

Chapter 1: The Nature of the Economic Problem


• Economic Problem: Unlimited wants exceed finite resources, leading to scarcity.

• Scarcity: A situation where there are not enough resources to satisfy everyone’s wants.

• Resources (Factors of Production): Used to produce goods and services; they are scarce.

• Economic Goods: Require resources to produce and have an opportunity cost.

• Free Goods: Do not require resources to produce and have no opportunity cost (e.g., air,
sunlight).

• Key Concept: As resources are scarce, choices must be made about their use.

Chapter 2: Factors of Production


• Four Factors of Production:

1. Land: Natural resources (e.g., forests, minerals, fish).

2. Labour: Human effort (both physical and mental).

3. Capital: Man-made resources used in production (e.g., machinery, tools).

4. Enterprise: The ability to take risks and make production decisions.

• Mobility of Factors:

- Geographical Mobility: Ability to move from one location to another.

- Occupational Mobility: Ability to switch from one type of work to another.

• Payments for Factors of Production:

- Land → Rent

- Labour → Wages

- Capital → Interest

- Enterprise → Profit

Chapter 3: Opportunity Cost


• Definition: The next best alternative foregone when a choice is made.
• Influences Decision Making:

- Consumers: Choosing between different products.

- Workers: Choosing between jobs.

- Producers: Deciding which goods to manufacture.

- Government: Allocating spending between different sectors.

• Example: If the government builds a hospital, it may have to forego building a school.

Chapter 4: Production Possibility Curves (PPC)


• Definition: A curve showing the maximum output of two goods that can be produced with
existing resources.

• Key Points on a PPC:

- On the curve: Efficient use of resources.

- Inside the curve: Unemployment or inefficient use of resources.

- Beyond the curve: Currently unattainable with existing resources.

• Movements Along the PPC: Reallocating resources between goods.

• Shifts in the PPC:

- Rightward shift: Increase in quantity/quality of resources or better technology.

- Leftward shift: Decrease in resources (e.g., war, natural disaster).

SECTION 2: The Allocation of Resources

Chapter 5: Microeconomics vs. Macroeconomics


• Microeconomics: Study of individual markets, firms, and households.

• Macroeconomics: Study of the entire economy (e.g., inflation, unemployment, economic


growth).

• Key Decision Makers:

- Households (consumers, workers, savers)

- Firms (producers, employers)

- Government (regulators, service providers)


SECTION 3: Microeconomic Decision Makers

Chapter 16: Money and Banking


• Functions of Money: Medium of exchange, store of value, unit of account, standard for
deferred payment.

• Characteristics of Money: Durability, portability, divisibility, acceptability, scarcity.

• Role of Commercial Banks: Accept deposits, provide loans, facilitate payments, offer
financial advice.

Chapter 17: Households


• Sources of Income: Wages, salaries, rent, dividends, interest, government benefits.

• Factors Affecting Spending and Saving: Income, interest rates, confidence, age, inflation.

SECTION 4: Government and the Macroeconomy

Chapter 24: Role of Government


• Key Roles: Regulation, taxation, spending, redistribution of income, providing public goods
and services.

• Types of Taxes: Direct (income tax), Indirect (VAT, sales tax).

Chapter 25: Macroeconomic Aims of Government


• Main Aims: Economic growth, full employment, price stability, balance of payments
stability, income redistribution.

Chapter 26-28: Fiscal, Monetary, and Supply-Side Policies


• Fiscal Policy: Government spending and taxation to influence the economy.

• Monetary Policy: Control of money supply and interest rates by the central bank.

• Supply-Side Policies: Policies to improve productivity and efficiency (education,


deregulation, tax cuts).

SECTION 5: Economic Development

Chapter 32: Living Standards


• Measures: GDP per capita, Human Development Index (HDI), literacy rates, life
expectancy.

• Issues: GDP does not consider income distribution or non-monetary factors.

Chapter 33: Poverty


• Causes: Unemployment, lack of education, discrimination, economic downturns.

• Solutions: Education, job creation, social security programs.


SECTION 6: International Trade and Globalization

Chapter 36-39: International Trade


• Specialization: Countries focus on producing goods where they have a comparative
advantage.

• Free Trade vs. Protectionism: Tariffs, quotas, subsidies, and non-tariff barriers.

• Exchange Rates: Fixed, floating, managed exchange rate systems.

• Balance of Payments: Records a country’s international trade transactions.

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