iGCSE Economics CAIE

This subject is broken down into 39 topics in 6 modules:

  1. The Basic Economic Problem 4 topics
  2. The Allocation of Resources 11 topics
  3. Microeconomic Decision Makers 8 topics
  4. Government and the Macroeconomy 8 topics
  5. Economic Development 4 topics
  6. International Trade and Globalisation 4 topics
Study this subject in the Adapt App →
  • 6
    modules
  • 39
    topics
  • 14,109
    words of revision content
  • 1+
    hours of audio lessons

This page was last modified on 28 September 2024.

A preview of iGCSE Economics CAIE in the Adapt app

Adapt is a revision planning app with full content coverage and unlimited past paper questions for 1,200+ GCSE and A Level subjects.

Study this subject in the Adapt app →

Economics

The Basic Economic Problem

The Nature of the Economic Problem

🤓 Study

📖 Quiz

Play audio lesson

The Nature of the Economic Problem

The Nature of the Economic Problem

Scarcity

  • The economic problem begins with scarcity. Despite our unlimited wants and needs, we live in a world with limited resources. This discrepancy forces us to make decisions on what to produce and consume.

Resource Allocation

  • The resources that are limited include land, labour, capital, and enterprise. These are also known as the factors of production.
  • Resource allocation deals with how we distribute these resources to satisfy the most wants and needs. It's about making decisions concerning what to produce, how to produce, and for whom to produce.

Opportunity Cost

  • Making decisions means making trade-offs. Whenever we choose one thing, we inevitably have to forego other possibilities. This is known as opportunity cost — the value of the best alternative forgone when making a decision.
  • Understanding opportunity cost is crucial for both individuals and societies at large, as it guides decision-making and helps us maximize the benefit of our limited resources.

Economic Systems

  • Different societies adopt different economic systems to tackle the economic problem, such as market economies, planned economies and mixed economies.
  • Each system has its own methods for resource allocation and different notions of what constitutes efficient production and equitable distribution.

The Production Possibility Frontier

  • The production possibility frontier (PPF) is a concept that illustrates the idea of scarcity, choice, and opportunity cost.
  • It graphs the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized.

Economic Growth and Sustainability

  • Economies aim towards economic growth, which means increasing the production of goods and services over time.
  • However, this poses a challenge to sustainability — ensuring that the resources used to fuel this growth are not depleted or permanently damaged.

By understanding these key aspects, one can gain a better understanding of the nature of the economic problem. Remember, economics is about making choices in a world of scarcity, and these concepts will help elucidate the dynamics involved in these choices.

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

Economics

Microeconomic Decision Makers

Firms and Production

🤓 Study

📖 Quiz

Play audio lesson

Firms and Production

Section 1: Role of Firms

  • Firms play a vital role in the economic system as they transform resources into goods and services.
  • These entities undertake production and selling activities aiming for profit maximisation.
  • They are the primary decision makers when it comes to what goods and services to produce, how to produce, and for whom to produce.

Section 2: Types of Firms

  • Sole traders are firms owned and operated by a single individual.
  • Partnerships involve two or more individuals sharing the profits and losses of a business.
  • Corporations are legally separate entities from their owners and have limited liability, with ownership determined by share ownership.

Section 3: Factors of Production

  • Firms utilise land, labour, capital, and enterprise to produce goods and services.
  • Land refers to all natural resources used in the production process.
  • Labour refers to the human effort used in production.
  • Capital refers to machinery, tools, and buildings needed for production.
  • Enterprise refers to the risk-taking and decision-making undertaken by the business owner or manager.

Section 4: Costs of Production

  • Firms face various costs in production such as rent for land, wages for labour, interest for capital and profit for the enterprise.
  • Costs can be classified as either fixed costs (do not change with the level of production) or variable costs (change with the level of production).
  • Understanding these costs aids the firm in making decisions about output levels, pricing, and profitability.

Section 5: Production Decisions

  • Firms must decide on the optimal mix of factors of production to maximise production efficiency.
  • The choice of production techniques could be labour-intensive (more human labour than machines) or capital-intensive (more machines than human labour) based on cost, availability, and type of production.

Section 6: Interaction with Other Economic Actors

  • Firms interact with workers as employers and with the government through taxes and regulations.
  • They sell their goods and services to consumers, driving the economic cycle.
  • Their production decisions impact the environment, causing them to interact with the society at large.

Course material for Economics, module Microeconomic Decision Makers, topic Firms and Production

Can I trust Adapt’s expertise?

Adapt is already used by over 600,000 students and trusted by over 3,000 schools. Our exam-specific content and assessments are meticulously crafted by expert teachers and examiners.

Find out more about the Adapt app →

Planner

An always up-to-date revision timetable.

A personalised, flexible revision timetable that stays up-to-date automatically.

Content

All the exam resources, in one place.

Over 20,000 topics broken down into manageable lessons with teacher-written, exam-specific lessons.

Assessment

Past-paper questions, with instant feedback.

Unlimited past paper questions with instant examiner feedback on how to improve.

Progress

Track progress, together.

Progress tracking to stay motivated, with real-time updates to the Parent Portal.

Download the app today to start revising for free.