Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

ECONOMICS
GCSE
REVISION
NOTES


Chapter 1: The Economic Problem


1) People have basic needs (water, food, air, shelter, clothing)
...



3) The economic problem - the resources required to produce goods and services are
scarce in comparison to people's wants
...
What to produce?

B
...
How to produce it?



5) The opportunity cost is the next best alternative forgone
...



2) Economies consist of two sectors:

A
...


B
...




3) Economic activities that occur in an economy:

A
...


B
...
The spending of consumers is consumer expenditure
...
Exchange - the trade of goods and services
...
Labour - people who are willing and able to work (Reward = wage)
...
Land - space to build, grow, area to exploit for resources (Reward = rent)
...
Capital - man made resources (fixed capital) and raw materials (working capital)

which help to produce goods and services
...
Enterprise - entrepreneurs, with business known-how find a gap in the market,

and who can manage and control firms
...
Lower health costs

B
...
Migration

D
...
Lower taxes on profit
B
...
Consumer goods - goods which satisfy consumer wants
...
Capital goods - man made resources which help to produce other goods and

services
...


C
...
They are provided by the government because no

private firm would wish to produce them
...
Merit goods - supplied by government, even if they can't afford to buy them

(again because the government thinks the public will benefit from them)
...




8) Organisation of production:

A
...
It is a slow process
...
Specialised - A quicker process, in which a line of workers , specialised in a

particular task work to produce something
...

9) Advantages of division of labour:

A
...
Full use is made of everyone's abilities

C
...
Allow for use of machinery


10) Disadvantages of division of labour:

A
...
Workers may feel alienated

C
...
Products are all the same (none are unique)



11) As well as people, firms and even geographic regions have specialised in the
production of particular goods and services (Saudi Arabia - oil, Scotland - whisky)
...
Medium of exchange

B
...
Unit of account



13) The old alternative, before money, was bartering, where instead of exchanging money
for a good/ service, a good/service is exchanged with a good/service
...




14) A good money is:

A
...
Durable

C
...
Divisible

E
...
State owned monopolies, where the state decides what to produce
...
Pros - everybody gets their needs, promotes equality
...
Cons - lack of choice, lack of incentive
...
Example - Russia, China, Cuba, North Korea



2) Capitalism - market economy:

A
...


B
...


C
...




3) Mixed economy:

A) Best of both world

B
...


C
...





Chapter 4: Business Organisations

Business
Type

Example


Ownershi
p

Control

Finance

Liability of
owners

Sole
Trader

Corner
Shop

Owner/
Manager

Owner/
Manager

Self
finance,
bank loan

Unlimited
liability

Partnershi Doctors,
p
JLP

Partners

Partners

Self
finance,
bank loan

Limited
liability

Private ltd Virgin
Company

Private
sharehold
ers/
directors

Private
sharehold
ers/
directors

Sell
shares to
limited
group

Limited to
your
investmen
t

Public ltd
Company

Public
sharehold
ers/
Manager

Public
sharehold
ers/
Manager

Sell
shares on
stock
exchange

Limited to
your
investmen
t

Google,
Apple

Cooperati
ve

The Coop Workers,
Customer
s

Managers Member
funds,
bank
loans

Limited
liability

1) Sole trader:

A
...


B
...
Cons - unlimited liability, lonely, few sources of money, can't sell shares,

business dies with owner
...
Minimum 2 people, up to 1000s, often professions
...
Pros - lives on with partner, more funding, limited liability, control and ownership

is the same
...
Cons - disagreement between partners, can't sell shares
...
Ltds and PLCs, shareholders appoint directors at AGM
...
Pros - can sell shares to raise finance, limited liability
...
Cons - divorce of ownership and control, high administrative cost, difficult

administration
...
Pros - popular with workers, who receive profits
...
Cons - difficult to raise money, badly run
...
This could be a company with two
offices, however is more generally a big company which produces and sell in many
countries
...
More customers

B
...
Cheaper labour

D
...
Resources

F
...
Lower average costs for production



7) Disadvantages for host country of hosting a multinational:

A
...
Can move factories to where it is profitable to produce

C
...
May interfere with the government

E
...
Public corporations (e
...









B
...

C
...

D
...


Chapter 5: Trade Unions



1) They are groups of workers with a common job/trade/employer
...
Defend interest of workers (pay, pensions, holidays)

B
...
Protecting jobs (stop governments/employers shutting down firms)

3) What do they do?

A
...
This prevents the

operations of firms
...
Picketing - prevent others from going to work
...


C
...


D
...




4) Collective bargaining - worker negotiating together for better working conditions/pay
have more power
...
A closed shop - workers must be unionised
...




5) Trade union reform - during 1970s, trade unions became increasingly militant
...
Closed shops were made illegal

B
...
Secondary picketing was made illegal





Chapter 6: Financial Institutions

1) Functions of the stock market:

A
...


B
...
This

enables investors to turn their profit into cash
...
Firms issue shares, giving investors part ownership of the firm
...



B
...
This is selling

shares for the first time - initial public offering
...
Returning to resell shares - rights issue
...
Shareholders get a vote at the AGM, where they appoint directors and decide the

level of the dividend
...


E
...

3) Companies often take over other companies for these reasons:

A
...
The target company has a particular product/technology

C
...
Above 30% gives control in practice

B
...
Past this the company has to make a formal offer



5) Mergers are likely if share prices are low
...
Advantages of mergers:

A
...
A quick way for successful firms to grow

C
...
IPO - company floating shares on stock exchange

B
...
Bull Market - upward trending market

D
...
Stock indices - the indication of value of a group of shares (LSE, NYSE)

F
...
Ordinary shares

B
...
Bonds (IOUs)



8) Banks are financial institutions in the money market which:

A
...
Charge interest on loans

C
...
Manage payments/transmission of money

E
...
Can offer investments



9) Types of banks:

A
...
Savings banks

C
...
Credit unions

E
...
Islamic bank



10) Functions of a central bank:

A
...
Government's bank

C
...
Sets official interest rate

E
...
Banker's bank

Chapter 7: How Prices are Determined


1) In markets, prices are determined by the demand and supply of foods/services
...
How much of a good consumers are willing and able to buy at each price
...
The law of demand - price of a good inversely affects quantity demanded
...
When P->, Qd <- (Contraction of demand)
D
...
Rise in income of consumer

B
...
Change in price of a substitute good

D
...
Advertising campaign (or bad PR)

F
...
Willingness and ability of firms to sell goods

B
...
When P->, Supply-> (Expansion of supply)
D
...
Climate

B
...
Wages

D
...
Raw materials

F
...
Taxes and subsidies

H
...
No excess of demand or supply (Qd=Qs)

B
...
Once at equilibrium, the market is in a stable state> It will remain in a stable state

unless a condition of demand or supply changes



P
P





S




P1






Pe









S

Pe
P1
D

D
Q

Q




Qd

Qe

Qs

Excess of Supply



Qs Qe Qd
Excess of Demand







D
...
There will be a contraction of supply and
an expansion of demand until equilibrium
...
When there's a excess of demand, prices are too low, so firms will raise their
prices too Pe
...




7) An example of a supply and demand question:
A
...


P


Market for Cars







P2
P1





D2
D1
Q









Q1 Q2

B
...
Therefore
when the price of petrol falls, driving a car become cheaper so demand increases to
D2, causing both price and quantity to rise (P->, Q->)
...
Measures the responsiveness of consumers and firms to changes in price

B
...
Unit elasticity is proportionate because the PED = 1
...


C
...
The number/availability of substitutes

B
...
The proportion of income spent on a commodity

D
...
Luxury vs Necessity good



10) Effects on total revenue:

A
...
If elastic, firms are incentivised to discount prices for TR rise

C
...
On a demand curve, the area is the revenue
...




11) Price elasticity of supply (PES):

A
...
Calculating PES:



PED= %

Qs

%






P

C
...
Time period

ii
...
Spare capacity
D
...
Perfectly inelastic supply occurs when supply is fixed (e
...
Football stadium)
F
...
g
...
Housing Market - Prices ->, Demand -> (because incomes and mortgage

availability ->), supply inelastic because of planning permission, land availability

B
...
If demand is inelastic, incidence (burden) of tax falls on consumers
...


B
...
Taxing elastic goods is a poor

revenue raiser but good for changing consumer behaviour
...
Vertical difference between supply curve is a price difference
...
Ad valorem tax (e
...
VAT) - imposition of VAT produces an increasing, non-

parallel (%) shift of supply as prices rise
...
To maximise profits

B
...
To increase customer base

D
...
To improve their image

F
...
Price - homogenous goods, high PED

B
...

They can be natural or artificial
...
Natural - by the nature of the market or industry:


i
...
First mover advantage (Facebook, Skype, Microsoft)


iii
...
Artificial:


i
...
The advantage of patents is that, for example,


pharmaceutical companies are motivated to bring new drugs to the market


by the monopoly profits
...
Predatory pricing - large firms lower prices to force smaller firms to


withdraw (economies of scale)
...
Limit pricing - maintaining low prices to keep threat of competition at bay


(benefits consumers)
...
Exclusive dealing - manufacturers make retailers stock only their brands
...
Full line forcing - Coca Cola forces retailers to stock all their drinks
...
The opportunity for big profits motivates innovation (profits must be temporary)

B
...
Benefits of standardisation (e
...
windows)



5) Disadvantages of monopoly power:

A
...
Little competition (poor quality, high prices, little innovation)



6) Price strategies:

A
...
Market skimming - charging high prices to yield high profits on new products

C
...
Perfect competition - only price competition (same good, no brands, no barriers

to entry)
...
g
...
Normal competitive markets - price and non-price competition (no barriers, easy

to enter)
...
g
...
Oligopoly - a few firms, little price competition, lots of non-price competition

(brands, BOGOFs)
...
g
...
There are barriers to entry (supermarkets

need land and planning permission, banking requires a licence)

D
...
Monopolies - pure monopolies (100% market), working monopoly (>25%)
...
How

we define monopoly also depends on the width of the market
...
Capital is a substitute for labour

B
...
Productivity


ii
...
Change in price or quality of capital (trend for increasing capital intensity


in MEDCs)


W






Qlab
Low
demand

High
demand



4) Supply of labour - the quantity of workers that are willing and able to work at each wage:

A
...
Skills, experience and qualifications required for a job


ii
...
Changes to the wage/non-wage benefits of a substitute form of
employment (result of increased demand for that form of employment)

W




£20





£2





Qlab






Few
workers

Many
workers




5) Wage differentials - reasons different workers in different jobs receive different wages:

A
...
Low and elastic demand, high and elastic supply (unskilled jobs, low

qualification, low productivity) - receive low wage
...


C
...
Satisfaction



6) Government intervention in the labour market:

A
...
08
...
Reason for NMW - raises standard of living for workers on very low wages,


prevents exploitation of vulnerable workers


ii
...
Best to set NMW at We (no unemployment, protects workers)





W
Sl
There is an excess
of supply, which is
unemployment

---