Unit 1 (5-10%)
1.1 Scarcity
Scarcity- The idea that we have unlimited wants and needs but limited resources to satisfy those wants
and needs.
Having to choose
Resources- Land, labour and capital (what is used to produce
1.2 Opportunity Cost and PPC
Opportunity cost- What you give up to produce
Constant opportunity cost- Straight line on graph
Increasing opportunity cost- Bowed out line on graph
Unit 1 (5-10%) 1
, When you have a change in resources or technology, your curve can shift
The graph
points inside the curve shows underutilisation or less efficiency/productivity
points on the curve are most efficient
points outside the curve are impossible
1.3 Comparative Advantage and Gains from Trade
Trade is a mutually beneficial exchange
Absolute Advantage- when one is better or more efficient as producing a product
Comparative Advantage- when trade is done according to a country’s opportunity cost so even if a
country has an absolute advantage both parties gain from trade
Terms of Trade- when two countries come to a consensus of the specific trade details.
1.4 Demand
The law of demand- there is an inverse relationship between price and quantity demanded
Unit 1 (5-10%) 2
1.1 Scarcity
Scarcity- The idea that we have unlimited wants and needs but limited resources to satisfy those wants
and needs.
Having to choose
Resources- Land, labour and capital (what is used to produce
1.2 Opportunity Cost and PPC
Opportunity cost- What you give up to produce
Constant opportunity cost- Straight line on graph
Increasing opportunity cost- Bowed out line on graph
Unit 1 (5-10%) 1
, When you have a change in resources or technology, your curve can shift
The graph
points inside the curve shows underutilisation or less efficiency/productivity
points on the curve are most efficient
points outside the curve are impossible
1.3 Comparative Advantage and Gains from Trade
Trade is a mutually beneficial exchange
Absolute Advantage- when one is better or more efficient as producing a product
Comparative Advantage- when trade is done according to a country’s opportunity cost so even if a
country has an absolute advantage both parties gain from trade
Terms of Trade- when two countries come to a consensus of the specific trade details.
1.4 Demand
The law of demand- there is an inverse relationship between price and quantity demanded
Unit 1 (5-10%) 2
