Theme 1

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  • Created by: April15
  • Created on: 17-10-19 09:27

TYPES OF GOODS

Public Goods -

  • non-rival and non-excludable
  • not produced at all in a free market
  • e.g: streetlamps

Merit Goods -

  • cause positive externalities
  • underproduced and underconsumed in the free market
  • e.g: education, healthcare

Demerit Goods -

  • cause negative externalities
  • overproduced and overconsumed in a free market
  • e.g: cigarettes, alcohol

Free Goods -

  • unlimited
  • e.g: sunlight, air

Normal Goods -

  • an increase in income leads to an increase in demand for these goods
  • most goods are normal goods

Inferior Goods -

  • demand for these goods decreases as income increases
  • usually substitutes

TYPES OF MARKET

  • Free Market
  • Command Economy
  • Mixed Economy

PRODUCTION POSSIBILITY FRONTIERS

A PPF shows the maximum output that an economy can produce if the economy is maximising the use of its resources and operating efficiently.

ppf-consumer-capital-goods

CAUSES OF ECONOMIC GROWTH

  • Discovering more raw materials (e.g. discovering oil fields)
  • Increase in the size of work force (e.g. immigration)
  • Increase in capital stock (e.g. investment in new machines, factories)
  • Increase in labour productivity (e.g. due to better technology)

SPECIALISATION & DIVISION OF LABOUR

Specialisation occurs when a country or firm concentrates on producing a particular good or service. Countries will specialise in producing goods where they have a comparative advantage. For example, Japan specialises in producing high-tech electronic…

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