iGCSE Economics Edexcel

This subject is broken down into 34 topics in 4 modules:

  1. The Market System 11 topics
  2. Business Economics 8 topics
  3. Government and the Economy 9 topics
  4. The Global Economy 6 topics
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  • 4
    modules
  • 34
    topics
  • 13,022
    words of revision content
  • 1+
    hours of audio lessons

This page was last modified on 28 September 2024.

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Economics

The Market System

The Economic Problem

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The Economic Problem

The Economic Problem

Definition and Understanding

  • The Economic Problem deals with decisions societies have to make about how to use limited resources to satisfy unlimited wants.
  • This issue arises due to the fundamental fact of scarcity, which is the shortage of resources in comparison to the desires and needs of people.
  • It is a universal issue affecting every individual, household, company, and government.

Resource Allocation

  • Resource allocation is a central concept of the economic problem, as societies need to decide what, how, and for whom to produce.
  • The three key resources to allocate are land, labour, and capital, often referred to as the factors of production.
  • The choices made in resource allocation have both opportunity costs and trade-offs.

Opportunity Costs

  • Opportunity cost is the next best alternative foregone when a choice is made.
  • It involves considering both explicit costs (outlay costs) and implicit costs (potential gain from other options).
  • Understanding opportunity cost leads to better decision making, as it illuminates the potential loss involved in pursuing a particular action.

Production Possibility Frontier (PPF)

  • The Production Possibility Frontier (PPF) is a tool used to illustrate the concept of opportunity cost and scarcity.
  • It shows the maximum potential output of two goods or services that a economy can achieve, when all resources are fully and efficiently employed.
  • Movements along the PPF curve highlight the trade-offs in production, while shifts of the curve may symbolise economic growth or decay.

Choices and Economic Systems

  • In resolving the economic problem, societies have developed different economic systems: the market economy, the planned or command economy, and the mixed economy.
  • In a market economy, decisions are made by private individuals and firms responding to price signals from supply and demand.
  • In a command economy, decisions are made by a central authority, usually the government.
  • A mixed economy combines elements of both the market and command economy.
  • The effectiveness of each system in solving the economic problem varies and can be subject to debate.

Course material for Economics, module The Market System, topic The Economic Problem

Economics

Business Economics

The Labour Market

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The Labour Market

The Labour Market

  • The Labour Market refers to the marketplace where final labour services are traded between employers and workers.
  • The demand for labour is derived from the demand for the goods and services workers produce.
  • The supply of labour is influenced by a variety of factors, including wages, working conditions, and social considerations.
  • The equilibrium wage rate in the labour market is determined by the intersection of the demand and supply of labour.
  • Labour market imperfections can lead to wage differentials, unemployment, and inefficiencies.

Demand for Labour

  • Businesses demand labour to produce goods and services. The higher the wage, the fewer workers a business is likely to employ.
  • The marginal product of labour is the increase in output resulting from employing one more unit of labour. Firms will hire workers up to the point where the cost of employing an additional worker equals the additional revenue that the worker produces.
  • Factors affecting demand include the demand for final goods and services, productivity of labour, and technological innovation.

Supply of Labour

  • The supply of labour is the total amount of workers willing and able to work in the labour market.
  • Wages and non-wage benefits can attract more workers into the labour market or a specific sector.
  • External factors such as changes in demographics, migration, and government policies can also impact the supply of labour.

Labour Market Imperfections

  • Labour market imperfections can lead to unemployment. This occurs when the supply of labour exceeds its demand.
  • Wage differentials occur when there is variation in wages for different types of jobs or workers within the same job role.
  • Discrimination can cause labour market imperfections, leading to inequalities in access to job opportunities and wage rates.

Labour Market Policies

  • Government intervention in the labour market can take the form of legislation (such as minimum wage laws), training programs, and social security benefits.
  • Unions can impact the labour market by negotiating for higher wages and better work conditions.
  • Government policies aim to promote equitable outcomes, competitive practices, and efficient allocation of resources in the labour market.

Summary

  • The Labour Market plays a crucial role in an economy where workers and employers interact and trade labour services.
  • Understanding the dynamics of demand and supply, wage determination, and policy interventions can help in observing and anticipating changes in the labour market.
  • It is important to understand how labour market imperfections and policies can impact the wellbeing of workers and the broader economy.

Course material for Economics, module Business Economics, topic The Labour Market

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