OCR GCSE Economics Unit A591 Notes

Here you will find my notes on OCR GCSE Economics Unit A591 (Unit 1): How the Market Works. I have taken extracts from the specification of what we need to know and then made detailed notes underneath on what the specification is asking for.

I have also made a document like this for Unit A592: How the Economy Works, Unit A593: The UK Economy and Globalisation and AQA GCSE Computer Science.

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OCRGCSEEconomicsUnitA591Notes
identifyandunderstandexamplesofthefourfactorsofproduction
· Land
· Labour
· Capital
· Enterprise
understandwhatismeantbythebasiceconomicproblem
· Resourcesarescarcebutourwantsareinfinitethereforeourwants
exceedtheresources.
understandwhyandhowchoicesaremade
· Choicesneedtobemadeonhowtoallocateresourcesfairlyandequally.
applytheconceptofopportunitycosttoalleconomicdecision-makers
· Opportunitycostisthenextbestalternativeforegonewhenmakinga
choice.
showanappreciationofhowresourcesareallocatedbyindividuals,firmsand
governments
· Resourcesareallocatedthroughouruseofmoneyandbygovernment.
understandthemeaningofprimary,secondaryandtertiarysectors
· Theprimarysectorinvolvestheextractiononrawmaterialsfromthe
land.
· Thesecondarysectorinvolvesthemanufactureofrawmaterialsinto
finishedgoods.
· Thetertiarysectorprovidesservices.
identifyandexplainthekeyfeaturesofmarketandmixedeconomies
· Inamarketeconomy,resourcesareallocatedbyprivatebuyersand
sellers.Allresourcesareprivatelyownedandpeopleactintheirself-
interest.
· Inaplannedeconomy,allresourcesareallocatedbygovernment.
Governmentownseverythingandcontrolspricesandincomes.
identifyandexplainthekeydifferencesbetweenpublicandprivateenterprises
· Publicenterpriseisthegovernmentsectoroftheeconomywhere
organisationsareownedandrunbygovernment.
· Privateenterpriseisthesectoroftheeconomywherefirmsareowned
andrunbyprivateindividualsandgroups-theirmainaimisprofit
maximisation.
understandthemeaningofspecialisation
· Specialisationiswhereeachworkerconcentratesononlyonesmall
aspectoftheproductionprocess.
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OCRGCSEEconomicsUnitA591Notes
evaluatethecostsandbenefitsofspecialisation
Benefitstothe Coststothefirm Benefitstothe Coststothe
firm worker worker
Workersbecome Qualitymaysuffer Workers'specific Boredomforthe
quickerandbetter ifworkersbecome skillswillbe workerastheydo
atproducing bored improved thesamejob
goods(more everyday
productive)
Becauseof Topquality Workerswillgeta Workerscould
increased workerswillbe betterpayasthey struggletofind
productivity, moreexpensive dotheirjobbetter anotherjobif
production theirskillsarenot
becomescheaper needed
pergood(lower
averagecosts)
Production/ Workersmaybe
outputlevelswill replacedby
increase machinery
explainhowandwhyindividuals,firmsandcountriesspecialise
· Bydoingaseparatepartoftheproductionprocesstheproductiontakes
lesstime(whichisascarceresource)andtheycanincreasethelevelof
production.…read more

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OCRGCSEEconomicsUnitA591Notes
explainwhatismeantbyacompetitivemarket
· Amarketsituationinwhichthereisalargenumberofbuyers(demand)
andsellers(supply).
understandtheimplicationsforbusinessesofoperatingincompetitivemarkets
· Competitiondrivesabusinesstobecomemoreefficientasthebusiness
willwantallofthecustomersinthemarket.
· Ifafirmhasagoodvarietyofproductsatagoodqualityandquantitythen
theycanattractawiderrangeofcustomers.
· Thiscanhelpthebusinessthriveandearnhigherprofits.
· Thebusinesscanalsogrowlargerandgainmarketshare.
· Howeverifabusinessdoesnotsatisfythenitwillfailandcustomerswill
gotootherfirmstobuytheirproducts.
explainthemeaningofmonopolyandmonopolypower
· Monopolyisasituationinwhichthereisonlyonefirmsellinginamarket.
· Monopolypoweriswhenafirmhasmorethan25%ofthemarketshare.
describeandevaluatethecausesandconsequencesofmonopolypower
Causesofmonopolypower
· Mergerandtakeover
· Statutorymonopoly
· Internalexpansion
· Branding
· Costbarriers
Advantagesofmonopolies Disadvantagesofmonopolies
· Researchanddevelopment · Insufficientallocationof
· Internationalcompetitiveness resourcesbytheprice
· Exploitationofeconomiesof mechanismasconsumershave
scale lesschoice
· Highprices
· Poorqualityandservice
· Firmsbecomeinefficient/
complacentanddevelop
unnecessarycosts
explainandevaluatetheroleofgovernmentinpromotingcompetition
· `Governmentsetslegalandinstitutionalframeworksformarketsand
companiestooperatein.Thatis,itputsinplacerulesandregulationsthat
determineappropriateconductoffirmsandindividuals,andthe
institutionsnecessaryforenforcingthem.'-OfficeofFairTrading
explainwhatismeantbydemand
· Demandisthequantitybuyersarewillingandabletobuyatagivenprice
inagivenperiodoftime.…read more

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OCRGCSEEconomicsUnitA591Notes
constructanindividualdemandcurveandamarketdemandcurvefrom
consumerdata
explainshiftsof,andmovementsalong,thedemandcurve
· Population
· Advertising
· Substitutes(priceof)
· Income
· Fashionandtrends
· Interestrates
· Complements(priceof)
· Legalrequirements
· Seasonalfactors
understandthemeaningofpriceelasticityofdemand
Theresponsivenessofthequantitydemandedtoachangeinprice.…read more

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OCRGCSEEconomicsUnitA591Notes
unitelasticdemand
perfectlyelasticdemand
perfectlyinelasticdemand
understandtheimplicationsofpriceelasticityofdemandforrevenue
· Ifdemandispriceelasticthenafallinthepricewillcausetotalrevenueto
increase.
· Ifdemandispriceinelasticthenariseinthepricewillcausetotalrevenue
toincrease.
explainwhatismeantbysupply
· Supplyisthequantityaproduceriswillingtoproduceatagivenpriceina
givenperiodoftime.…read more

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OCRGCSEEconomicsUnitA591Notes
constructanindividualfirm'ssupplycurveandamarketsupplycurvefrom
productiondata
explainshiftsof,andmovementsalong,thesupplycurve
· Productivity
· Indirecttaxes
· Numberoffirmsinthemarket
· Technology
· Subsidies
· Weather
· Costsofproduction
understandthemeaningofpriceelasticityofsupply
· Theresponsivenessofthequantitysuppliedtoachangeinprice.…read more

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OCRGCSEEconomicsUnitA591Notes
unitelasticsupply
perfectlyelasticsupply
perfectlyinelasticsupply
understandtheimplicationsofpriceelasticityofsupplyonbusinesses
· Ifsupplyispriceelasticthenafallinthepricewillcausetotalbusinessto
increase.
· Ifsupplyispriceinelasticthenariseinthepricewillcausetotalbusiness
toincrease.
understandhowtheinter-relationshipbetweenmarketforcesdetermines
equilibriumprice
· Wherethedemandandsupplycurvesmeetthisiscalledtheequilibrium.
Thisisalsothemarket-clearingprice.
understandandexplaintheimpactofcompetitiononprice
· Acompetitivemarketoccurswhenthereisnosingleindividualfirmthat
caninfluencetheprice.Thepriceisdeterminedbytheforcesofdemand
andsupply.…read more

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OCRGCSEEconomicsUnitA591Notes
explainandassesstheeffectsoftaxesandsubsidiesonpriceandquantityin
competitivemarkets
· Taxeswilldecreasethesupplythereforethepricewillriseandthe
quantitywillfall.
· Subsidieswillincreasethesupplythereforethepricewillfallandthe
quantitywillrise.
explainandassesstheeffectsofmaximumandminimumprices
· Aminimumpricecancauseexcesssupplyascustomerswillnotwantto
buytheproduct.Businessesthatselltheirproductsgetmorerevenue.
· Amaximumpricecancauseexcessdemandandunofficialmarketsare
likelytodevelopasifpeoplepurchasedthegoodtheycansellit
themselvesforahigherprice.Businessesthatselltheproductsgetless
revenue.
identifybusinessobjectives
· Profitmaximisation
· Tobreakeven
· Toincreasemarketshare
· Tosurvive
· Tomakereturnstoshareholders(dividends)
· Toincreasesales
· Toprovideagoodservice
identifyandcalculatetotalandaverage,fixedandvariablecosts
· Totalcosts=Fixedcosts+Variablecosts
· Averagecosts=Totalcosts/Numberofunitsproduced
· Fixedcostsarethesameeverytimenomatterhowmanyunitsare
produced
· Variablecostsdependonhowmanyunitsareproducedandsold
identifyandcalculatetotalandaveragerevenues
· Totalrevenue=Price*Quantitysold
· Averagerevenue(price)=Totalrevenue/Quantitysold
identifyandcalculateprofit
· Profit=Totalrevenue-Totalcosts
understandwhatismeantbyproductivity
· Productivityisoutputperworkerperperiodoftime.
explainthedifferencebetweenproductionandproductivity
· Productioniscombiningscarceresourcestoproduceanoutputwhereas
productivityisoutputperworkerperperiodoftime.…read more

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OCRGCSEEconomicsUnitA591Notes
explainhowproductivitymaybeincreased
· Specialisationoflabour(workersbecomebetteratdoingtheirtask)
· Substitutionofcapital(faster,canrunwithoutbreaks)
· Workerinvolvement(trainingtheworkersgivesthemnewtechniques,
skillsandqualifications)
explainandassesstheimpactofcompetitiveforcesontheneedforincreased
productivity
· Firmsneedtoincreasetheirproductivityinacompetitivemarketinorder
toprovideabetterquality,quantityandpricetoattractmorecustomers.
understandandexplaintheroleandoperationoftheproductmarket
· Intheproductmarket,firmssupplygoodsandservicestosatisfy
consumerdemand.
evaluatethebenefitsandlimitationsoftheproductmarket
Benefitsoftheproductmarket Limitationsoftheproductmarket
· Fairestwayofallocating · Peoplecannotobtaingoodsand
resources servicestheycannotafford
· Createsjobs · Monopoliesmayoccur
understandhowandwhyfirmsgrowinsize
· Firmsgrowinsizesotheycanenjoythebenefitsofgrowth
· Firmscangrowinternally:
· Gettingmoreoutlets/factories
· Hiringmorelabour
· Increasingthelevelofproduction
· Firmscangrowexternally:
· Integration
· Merger
· Takeover
explaininternalandexternaleconomiesanddiseconomiesofscale
· Internaleconomiesofscaleiswhenonefirmgrowsinsize(increases
output)andsobenefitsfromloweraveragecosts.
· Externaleconomiesofscaleiswhenawholeindustrygrowsinsize,soa
firmwithinthatindustrybenefitsfromloweraveragecosts.…read more

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OCRGCSEEconomicsUnitA591Notes
discussthecostsandbenefitsofgrowthforabusiness
Costsofgrowth Benefitsofgrowth
· Twosetsofmanagersmaynot · Increasedprofits
agree · Increasedmarketshare
· Businessesmayhavedifferent · Newideasfromtheother
objectivesandtargets businesses
· Costlytomerge/takeover · Nocompetitionwiththeother
· Lesschoiceforconsumers businesses
· Higherprices · Gainfromeconomiesofscale
· Diseconomiesofscale
explainandassessthegainsfromcompetitivemarketsforfirms,consumers,etc.
· Theimplicationsforfirmsarestatedabove
· Consumerscan`shoparound'togetthebestdeal
· Theyhavevarietyandchoicetochoosefrom
· Lowerpricesforconsumers
· Firmswillofferabettercustomerserviceandabetterlocation
understandandexplaintheroleandoperationofthelabourmarket
· Thelabourmarketisthenominalmarketinwhichworkersfindpaying
work,employersfindwillingworkers,andwageratesaredetermined.
identifythedifferencesbetweengrossandnet,andrealandnominalincome
· Grossincomeistheamountapersonreceivesbeforealldeductionsare
takenintoaccount.
· Netincomeistheperson'stake-homepay(afterdeductions).
· Realincomeisincomepaidtolabour,unadjustedfortheeffectsof
inflation.
· Nominalincomeisincomepaidtolabour,adjustedfortheeffectsof
inflation.
understandwagedeterminationusingsimpledemandandsupplyanalysis
· Wherethedemandandsupplycurvesmeet,themarketwageandthe
numberofemployedworkersisdetermined.…read more

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