AS-level Economics Summary

Pretty much a summary of the year 12 course (critical evaluation not included, this is an important skill you will need to develop) this just contains everything taught(in summary).If anything is missing please let me know. I have also found websites like www.dineshbakshi.com to be most useful.

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  • Created on: 16-12-12 11:43
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Year 12 Economic Notes

Basic Economic Ideas
Economic efficiency means the using of resources in such a way as to maximize the production of goods and
services. Economic efficiency exists when

No one can be made better off without making someone else worse off.
More output cannot be obtained…

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Allocative efficiency
Allocative efficiency is a situation in which the limited resources of a firm are allocated in accordance with the
wishes of consumers. An allocatively efficient economy produces an "optimal mix" of commodities. In short, the
products that are most wanted must be produced.
A competitive market can…

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Because people have different values, normative statements often provoke disagreement. An economist whose
values lead him or her to conclude that we should provide more help for the poor will disagree with one whose
values lead to a conclusion that we should not. Because no test exists for these…

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Instead there is a continuum of different characteristics






What happens when countries move from command economy to
market economy?
CHARACTERISTIC COMMAND ECONOMY MARKET ECONOMY
From: government ownership To: private ownership
Ownership of resources:
From: centrally planned To: by the market
Decision making:
From: "the social good" To: self interest…

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Limited Resources
On the other hand, we have limited resources to produce these goods and services we want. There are not enough
car factories to provide cars to everybody on earth. Everything on this planet has some limits except for our Wants.
When unlimited wants meet limited resources, it…

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Divisibility
Good money is that which could be divided into small units without losing any value.

Durability
Money should be durable. It should not lose its value with the passage of time. The gold and silver coins do not
wear out quickly and quality of money remains the same.…

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Advantages

Producers and consumer have sovereignty to choose what to produce and what to consume but
production and consumption of harmful goods and services may be stopped by the government.

Social cost of business activities may be reduced by carrying out costbenefit analysis by the
government.

As compared to…

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Examples of Planned economies

North Korea

Cuba

Turkmenistan

Myanmar

Belarus

Laos

Libya

Iran

Iraq (until 2003)


Market Economic System
The central thought of this system is that it should be the producers and consumers who decide how to utilise the
resources. Thus, the market forces decide what to produce,…

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Disadvantages

Unemployment: Businesses in the market economy will only employ those factors of production which
will be profitable and thus we may find a lot of unemployment as more machines and less labour will be used
to cut cost.

Certain goods and services may not be provided: There may…

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In the graph, if all the resources are used to produce Schools then there will be no Hospitals. If you move to the
other end then all the resources would be used to produce Hospitals and not Schools will be there in the economy.
Government has to move along…

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