basic economics

Powerful Essays
Topics: Economics
Cambridge University Press
978-0-521-12665-6 - Cambridge International AS and A Level Economics, Second Edition
Colin Bamford and Susan Grant
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Basic economic ideas

Basic economic ideas
Core

On completion of this core section you should know:
• what is meant by scarcity and the inevitability of choices that have to be made by individuals, firms and governments
• what is meant by opportunity cost
• why the basic questions of what, how and for whom production takes place have to be addressed in all economies
• what is meant by factors of production, namely land, labour, capital and enterprise
• what is meant by the division of labour
• the characteristics of a production possibility curve
• how resources are allocated in market, planned and mixed economies
• problems of transition when central planning in an economy is reduced
• the difference between positive and normative statements in Economics
• the functions and characteristics of money.

One economic problem or many?
Economists have to deal with a whole range of economic problems. You may have seen TV programmes about the misery of unemployment and poverty; you may have read about the difficulties caused by inflation or heard politicians discuss exchange rate crises on the evening news. You may also be aware of debates surrounding issues such as the acute shortage of skilled labour, the benefits of greater liberalisation of international trade, the problems of global warming and the population explosion in many developing economies. Despite this extensive range of issues, which economists are trained to consider, they often talk about ‘the economic problem’. This is the fundamental problem from which all others arise. This is the fact that we have scarce resources to satisfy our unlimited wants. As a result of this problem, which is sometimes called the problem of scarcity, we have to make a choice, and it is the task of the economist

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