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Economics revision notes

The economic problem- Scarce recourses and infinite wants . Scarcity is limited or finite recourses that
cannot meet wants. We have infinite wants as they are continuously growing due to the desire for a
better quality of life and so the scarce resources cannot meet this.

The…

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recourses are used and current technology is utilised. It is the shape it is because certain resources
are better suited to making certain goods and so will be less efficiently used elsewhere

Trade off- A gain in one area offset by a loss in another due to the opportunity cost.…

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Equilibrium- The point where demand matches supply where the price and quantity can be measured
from.



Supply- The amount of a commodity that producers are willing and able to supply over a given range
of prices and period of time. At higher prices a higher quantity will be supplied than…

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Necessities and addictive products like petrol and cigarettes are inelastic




Evaluating PED- If prices are elastic they should decrease prices to increase total revenue however
this depends on the their capacity and starting price of the product. if it is inelastic they should
increase prices but this risks the product…

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Efficiency- Utilizing resources to maximise the production on the PPC so that waste is minimal or non
existent

Allocative inefficiency- The market is in equilibrium with demand and supply meeting at the
equilibrium price so there is no shortage or excess supply

Competition- Competitive markets are ones where firms competing…

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may not be aware of positive or negative externalities. Asymmetric information is when both sides
may not have the same information if the seller doesn't pass on information.

Government intervention is a way of solving market failure. There are market and non market
solutions with economists preferring market based solutions…

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at the point of use leading to more positive externalities, it is government run so will have high
standards, more equitable as rich pay more + poorer can afford the product, provides lots of jobs
and the government can use the recourses to provide specialist services

Government failure- Occurs when…

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