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Page 1

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The reasons for individuals,
organisations and societies having to
make choices
The central economic problem of scarcity, which arises from infinite wants and finite
Finite economic resources/factors of production of land, labour, capital and
How scarcity gives rise to choice, exchange and specialisation.
Markets as an approach to…

Page 2

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Entrepreneurship human capital. Two main functions to organise other factors of
production in order to produce goods and services. And the second refers to the
ability and inventiveness of those who are prepared to take risks such as Richard

Explain how specialisation can be used to address the problem…

Page 3

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Command/ centrally planned economy: an economic system in which most
resources are state owned and also allocated centrally

government has central role in the decisions that are made in terms of what
is produced, how it is produced and for whom to produce

decision making is by planning boards and…

Page 4

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examples of opportunity cost exist at the level of the individual, the
household, the firm, the government and the economy:
The opportunity cost of deciding not to work is the lost wages foregone
The opportunity cost of spending money on a foreign holiday is the lost
opportunity to buy a…

Page 5

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Moving from Point A to B will lead to an increase in servics (2225). But, the opportunity
cost is that output of goods falls from 15 to 11.
At point C, the economy is inefficient. We can increase both goods and services without
any opportunity cost.
The curve can also…

Page 6

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as we move down the PPF, as more resources are allocated towards Good Y,
the extra output gets smaller ­ and more of Good X has to be given up in order
to produce the extra output of Good Y. This is known as the principle of
diminishing returns. Diminishing…

Page 7

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The PPF does not always have to be drawn as a curve. If the opportunity cost for
producing two products is constant, then we draw the PPF as a straight line. The
gradient of that line is a way of measuring the opportunity cost between two goods.

Explaining Shifts in…

Page 8

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Competitive markets and how they work
The nature of a competitive market and its role in influencing choice and achieving
an optimum allocation of scarce resources.
1) Candidate should be able to Understand what is meant by a `competitive market'
Competitive markets exist when there is genuine choice for consumers…

Page 9

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There are price fluctuations so if the producers put more of their products
on the market more likely that prices will fall, this will also be a reason why
buyers may hold…

Page 10

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o If the rise in prices is greater than the rise in money income, then the real
income has actually fallen, assuming no change in deductions such as income
tax. This isn't good, as it reduces the ability to pay for goods and services.
o Increase in consumers income is…




This is a 48 page summary of the entire unit 1 AS course. Well written with good diagrams it is a good revision guide.

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