IGCSE Economics Revision Notes

The Basic Economic Problem: Scarcity and Choice

• Scarce Resources & Unlimited Wants: Scarcity of resources vs. unlimited human wants is central to economics.
• Scarcity: Limited resources (workers, machines, materials) and limited government funds against unlimited wants.
• Economic Choice & Opportunity Cost: Deciding how to use scarce resources, with opportunity cost being the benefit lost from the next best alternative.

Factors of Production

• Land: Natural resources like land, water, air.
• Labour: Human input, skill levels form human capital.
• Capital: Man-made goods used in production, e.g., machinery.
• Enterprise: Entrepreneurial ideas and organization of other factors.

Types of Production

• Primary: Raw material extraction (e.g., mining, agriculture).
• Secondary: Manufacturing goods from raw materials (e.g., car production).
• Tertiary: Service industry (e.g., banking, retail).
• De-industrialisation: Shift from primary to tertiary sectors in advanced economies.

Specialisation and Division of Labour

• Division of Labour: Workers specialize in specific tasks, increasing efficiency.
• Advantages: Increased production, expertise, higher pay.
• Disadvantages: Boredom, reduced quality, potential job loss to machines.

Economic Systems

• Free Market: Decisions by private firms and individuals; allocation via supply and demand.
• Command Economy: Government makes all economic decisions.
• Mixed Economy: Combination of private and government decision-making.

Types of Business Ownership

• Sole Trader: Single owner with unlimited liability.
• Partnership: 2-20 owners, shared liability.
• Private Limited Company (Ltd): Shareholders with limited liability.
• Public Limited Company (Plc): Shareholders can trade shares publicly, limited liability.

Demand and Supply

• Demand: Willingness to buy at a given price.
• Supply: Willingness to sell at a given price.
• Price Equilibrium: Where supply equals demand.
• Elasticity: Sensitivity of demand or supply to changes in price.

Inflation

• Causes: Cost-push (increased production costs) and demand-pull (excessive demand).
• Remedies: Control demand via interest rates/taxes, limit cost increases, manage money supply.

Economic Growth

• Causes: Increased resources, improved technology/skills, investment.
• Trade Cycle: Boom, slump, recession, recovery.

Unemployment

• Types: Structural, cyclical, frictional, seasonal.
• Remedies: Government support, training, economic stimulus.

International Trade

• Benefits: Specialisation, economies of scale, increased variety, political ties.
• Trade Barriers: Tariffs, quotas, subsidies, safety standards.
• Free Trade vs. Protectionism: Arguments for greater efficiency, choice, against protecting inefficiency.

Differences between Developed and Developing Economies

• Development Indicators: GNP per capita, life expectancy, literacy.
• Challenges for LDCs: Investment shortage, need for foreign aid, reliance on multinationals.

These notes provide a high-level overview of key economic principles, systems, and issues relevant to IGCSE Economics.