Higher Economics SQA

This subject is broken down into 32 topics in 4 modules:

  1. Economics of the Market 12 topics
  2. UK Economic Activity 5 topics
  3. Global Economic Activity 9 topics
  4. Current Economic Issues 6 topics
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This page was last modified on 28 September 2024.

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Economics

Economics of the Market

The Economic Problem

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The Economic Problem

The Economic Problem

  • Scarcity is a fundamental concept in economics. It arises because resources are limited, but human wants are unlimited.
  • The economic problem therefore involves deciding how best to allocate these scarce resources to meet as many of our unlimited wants as possible.
  • All societies face the basic economic problem of deciding what to produce, how to produce it, and for whom it should be produced.
  • This problem applies regardless of the type of economic system employed, be it a free market economy (such as in the US), a command economy (as in North Korea), or a mixed economy (like in the UK).

Factors of Production

  • The factors of production include: land, labour, capital, and entrepreneurship.
  • Land refers to all natural resources, including minerals, forests, and bodies of water.
  • Labour is the human effort required in production, both physical and mental.
  • Capital includes all man-made resources used in production, such as machinery, buildings, and so on.
  • Entrepreneurship refers to the management and organisation of the other three factors, as well as the risks taken in business decisions.

Economic Decisions and Tradeoffs

  • Because of scarcity, decisions must be made about how best to use and distribute resources. These decisions often entail trade-offs.
  • A trade-off represents the alternative we sacrifice when we make a decision. For instance, if we decide to spend more on healthcare, there might be less money available for education.
  • The concept of opportunity cost is crucial in understanding economic decisions. It represents what you give up in order to get something else.
  • A production possibility frontier (PPF) graphically represents the concept of trade-off and opportunity cost. The PPF shows the maximum possible output of two goods or services an economy can produce when all resources are fully and efficiently employed.

Economic Systems

  • An economic system is the method adopted by a society to resolve the economic problem.
  • Free market economies allow the laws of supply and demand to guide the allocation of resources and production.
  • Command (or planned) economies delegate these decisions to the government or central authority.
  • Most economies are actually mixed, with a blend of free market principles and government intervention, to try and get the best of both worlds.

Economic Efficiency

  • Economic efficiency occurs when a society obtains the largest possible amount from its limited resources. It indicates a minimisation of waste.
  • Productive efficiency is achieved when products are created at the lowest possible cost.
  • Allocative efficiency is reached when resources are distributed in a way that reflects consumer preferences.
  • Pareto efficiency is a state of economic efficiency where any changes made to assist one party would harm another.

Remember, understanding these key concepts is essential to tackling the "Economics of the Market" component of your economics course. Be sure to review and have solid definitions in mind for each term.

Course material for Economics, module Economics of the Market, topic The Economic Problem

Economics

UK Economic Activity

Place of Scotland in the UK economy

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Place of Scotland in the UK economy

Place of Scotland in the UK Economy

Overview

  • The Scottish economy, while an integral part of the UK, has distinct traits and priorities.
  • It is the third largest economy in the UK, after England and Wales.
  • Despite being only 8% of the UK population, Scotland produces approximately 9% of the UK's GDP.

Major Sectors

  • Services dominate the Scottish economy, providing the bulk of employment and contributing a significant portion to GDP. This sector includes everything from finance to tourism.

  • Another key sector is oil and gas extraction, concentrated primarily in the North Sea. Revenue from this sector is substantial but fluctuates with global oil prices.

  • Manufacturing, particularly food and beverages, is also vital. Scotland is internationally renowned for its whisky exports.

  • The public sector is considerable in Scotland, with the NHS, local authorities, and education institutions providing many jobs.

Economic Performance

  • Like the wider UK, Scotland has experienced periods of economic growth and recession, often in line with global economic trends.

  • Despite volatility in specific sectors like oil and gas, Scotland's economic diversity helps cushion against extreme fluctuations.

  • Scotland's economy has both strengths, such as its rich natural resources (such as oil and renewable energy sources), and challenges, such as productivity levels behind those in England and the rest of the UK.

Trade and Investment

  • Scotland continues to be a significant player in UK trade, with the rest of the UK being its most substantial trading partner.

  • However, Scotland also trades globally, exporting goods such as whisky, salmon, and manufactured goods to countries around the world.

  • It also attracts a significant portion of foreign direct investment (FDI), with companies drawn by factors such as skilled workforce and natural resources.

Influence on UK Economy

  • Scotland's economy has a reciprocal relationship with the wider UK economy. It affects and is influenced by the UK's economic performance.

  • Changes in Scottish economic activity, like oil production or fiscal policies, can have ripple effects in the overall UK economy.

  • Conversely, UK-wide policies and economic trends can impact Scotland, underlining the interdependency of their economies.

Future Perspectives

  • The future of Scotland's place in the UK economy will likely be influenced by numerous factors, including political decisions (such as Brexit and potential Scottish independence), global economic trends, and the transition to a greener economy.

Course material for Economics, module UK Economic Activity, topic Place of Scotland in the UK economy

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