A Level Economics CAIE
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54 topics in 5 modules
☑️ Basic Economic Ideas and Resource Allocation 9 topics
- Scarcity, Choice and Opportunity Cost
- Positive and Normative Statements Factors of Production
- Resource Allocation in Different Economic Systems and Issues of Transition
- Production Possibility Curves
- Money
- Classification of Goods and Services
- Efficient Resource Allocation
- Externalities and Market Failure
- Social Costs and Benefits; Cost-Benefit Analysis
☑️ The Price System and the Micro Economy 13 topics
- Demand and Supply Curves
- Price Elasticity, Income Elasticity and Cross-Elasticities of Demand
- Price Elasticity of Supply
- Interaction of Demand and Supply
- Market Equilibrium and Disequilibrium
- Consumer and Producer Surplus
- Law of Diminishing Marginal Utility
- Indifference Curves
- Budget Lines
- Types of Cost, Revenue and Profit, Short-Run and Long-Run Production
- Different Market Structures
- Growth and Survival of Firms
- Differing Objectives of a Firm
☑️ Government Microeconomic Intervention 10 topics
- Maximum and Minimum Prices
- Taxes (Direct and Indirect)
- Subsidies
- Transfer Payments
- Direct Provision of Goods and Services
- Nationalisation and Privatisation
- Policies to Achieve Efficient Resource Allocation and Correct Market Failure
- Equity and Policies Towards Income and Wealth Redistribution
- Labour Market Forces and Government Intervention
- Government Failure in Microeconomic Intervention
☑️ The Macro Economy 16 topics
- Aggregate Demand and Aggregate Supply Analysis
- Inflation
- Balance of Payments
- Exchange Rates
- The Terms of Trade
- Principles of Absolute and Comparative Advantage
- Protectionism
- Economic Growth, Economic Development and Sustainability
- National Income Statistics
- Classification of Countries
- Employment/Unemployment
- The Circular Flow of Income
- Money Supply (Theory)
- Keynesian and Monetarist Schools
- The Demand for Money and Interest Rate Determination
- Policies Towards Developing Economies; Policies of Trade and Aid
☑️ Government Macro Intervention 6 topics
- Types of Policy: Fiscal, Monetary and Supply Side Policy
- Policies to Correct Balance of Payments Disequilibrium
- Policies to Correct Inflation and Deflation
- Government Macro Policy Aims
- Inter-Connectedness of Problems
- Effectiveness of Policy Options to Meet all Macroeconomic Objectives
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A Level Economics CAIE Revision Content
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A Level Economics CAIE - Basic Economic Ideas and Resource Allocation - Scarcity, Choice and Opportunity Cost Content Preview
Basic Economic Ideas and Resource Allocation
Scarcity, Choice and Opportunity Cost
Scarcity
- Scarcity refers to the basic economic problem: the gap between limited resources and theoretically limitless wants.
- This situation requires people to take decisions about how to allocate and use resources efficiently.
- It ensures that resources are used to best effect.
- All goods and services are scarce because resources are limited.
- Scarcity forces choices in how resources are allocated.
Choice
- Choice refers to the decisions individuals, businesses and governments make about how to best allocate resources.
- We must make choices about the uses of resources because there is a limit to the amount of resources that can be produced.
- Due to scarcity, choices must be made.
- Every choice has a cost (opportunity cost).
Opportunity Cost
- Opportunity Cost is what you have to give up in order to get something. The concept of opportunity cost allows us to examine the true cost of making one choice over another.
- It is also referred to as economic cost.
- It is integral to the study of economics since every decision we make requires a trade-off.
- Often there is no 'right' choice, but rather some choices that are better than others depending on what a individual or society values.
- Opportunity cost can be measured in non-monetary terms. For example, the opportunity cost of deciding not to work an extra hour is the lost wages that could have been earned.
Example of Scarcity, Choice and Opportunity Cost
- Suppose the government has £10 million that it could either invest in healthcare or education.
- The opportunity cost of deciding to invest in healthcare is the foregone benefits to society from improved education.
- This example demonstrates the principle of scarcity (limited money to invest), the need for choice (healthcare or education), and the concept of opportunity cost (benefits of education forgone).
Question: What can be considered as the opportunity cost if a government decides to spend its extra budget on infrastructure development instead of improving the unemployment benefits system?
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