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MARKETS AND SOCIETY
THE BASIC ECONOMIC PROBLEM
Opportunity cost - the next best alternative foregone
Firms Firms may have to decide whether to invest in new machinery or to
increase dividends to shareholders
Government The government may be faced whether to allocate money to the
NHS or to education
Individuals…

Page 3

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e.g. in order to produce 90 guns, the economy
must forego 40 guns
60 80 90

A shift may be caused by:
An increase in the quantity of the factors of production
Improvements in efficiency or new technology e.g. IT

Page 4

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Page 5

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Specialisation
pens
guns

Productivity - measures output per input e.g. time period or worker
Better productivity is achieved when more waste is eliminated
SUPPLY DEMAND AND MARKETS
Market - the set of all actual and potential buyers of a product or service
Firms seek to maximise profit
Individuals seek to…

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Page 7

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Demand curves are usually negative sloping because:
· a fall in the price makes the good cheaper relative to substitutes
· a fall in price increases the consumers purchasing power and may encourage them to
buy more of the good
Exceptions
Veblen goods a fall in the price of a…

Page 8

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Page 9

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Market equilibrium - When the market clears, demand equals supply.
P
S
P
S
PE
PE
D
D
Q1 QE Q2
Q
Q1 QE Q2
Q

Excess supply is shown above, here firms will be forced to reduce prices in order to shift
stock causing an expansion along the demand…

Page 10

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A shift in the supply curve to the
right, will will raise prices and expand the quantity
reduce prices and expand the
quantity supplied
demanded
Demand will increase when:
Supply will increase when:
Real income
Prices of factors of production
Prices of substitutes
Productivity - unit labour costs
Prices of…

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meg

Report

definitely the most valuable document I've had for revision, I literally can't thank you enough!

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Pages in this set

Page 1

Preview of page 1

Page 2

Preview of page 2
MARKETS AND SOCIETY
THE BASIC ECONOMIC PROBLEM
Opportunity cost - the next best alternative foregone
Firms Firms may have to decide whether to invest in new machinery or to
increase dividends to shareholders
Government The government may be faced whether to allocate money to the
NHS or to education
Individuals…

Page 3

Preview of page 3
e.g. in order to produce 90 guns, the economy
must forego 40 guns
60 80 90

A shift may be caused by:
An increase in the quantity of the factors of production
Improvements in efficiency or new technology e.g. IT

Page 4

Preview of page 4

Page 5

Preview of page 5
Specialisation
pens
guns

Productivity - measures output per input e.g. time period or worker
Better productivity is achieved when more waste is eliminated
SUPPLY DEMAND AND MARKETS
Market - the set of all actual and potential buyers of a product or service
Firms seek to maximise profit
Individuals seek to…

Page 6

Preview of page 6

Page 7

Preview of page 7
Demand curves are usually negative sloping because:
· a fall in the price makes the good cheaper relative to substitutes
· a fall in price increases the consumers purchasing power and may encourage them to
buy more of the good
Exceptions
Veblen goods a fall in the price of a…

Page 8

Preview of page 8

Page 9

Preview of page 9
Market equilibrium - When the market clears, demand equals supply.
P
S
P
S
PE
PE
D
D
Q1 QE Q2
Q
Q1 QE Q2
Q

Excess supply is shown above, here firms will be forced to reduce prices in order to shift
stock causing an expansion along the demand…

Page 10

Preview of page 10
A shift in the supply curve to the
right, will will raise prices and expand the quantity
reduce prices and expand the
quantity supplied
demanded
Demand will increase when:
Supply will increase when:
Real income
Prices of factors of production
Prices of substitutes
Productivity - unit labour costs
Prices of…

Comments

meg

Report

definitely the most valuable document I've had for revision, I literally can't thank you enough!