IGCSE Economics
Economics - The study of how scarce resources can be allocated to satisfy people’s unlimited wants.
Scarcity - When there are not enough resources to satisfy our wants and needs.
Resources - The inputs that are used in the production process to produce goods and services. These
are also called Factors of Production. Resources are limited.
Capital - Human-made goods that are used in the production of other goods. Payment
comes in Interest
Entrepreneurs (Enterprise) - The person who takes the risk and has the skills to combine the
other factors of production to produce goods and services. Payment comes in Profit
Labour - Human work or effort and the people who offer their services to businesses in
exchange for wages. Payment comes in Wages
Land - Any resource that exists as part of a natural process. Can be renewable or non-
renewable. Payment comes in Rent
Geographical mobility – the resource is capable of changing location
Occupational mobility – the resource is capable of changing use
Opportunity Cost - The next best alternative foregone e.g. Mary could buy lettuce or chips with her
$5 and she chose chips. Lettuce would be Mary’s opportunity cost.
Production possibility curve - a curve showing the maximum output of 2 products and combinations
of these products that can be produced given existing resources and technology.
This company used to produce 8
Computers and 35 Books (A) with the
A resources it had, but now it sells only 5
computers but 60 books (B).
Therefore, this business has an
B opportunity cost of 3 computers as it
decided to make more books.
,Consumer – people or firms who need or want goods and services
Producers – use resources to make goods and services to satisfy consumers’ needs and wants
Wants – what we desire but do not necessarily need to survive e.g. games, bags
Needs – what we must have in order to survive e.g. food, clothing, shelter
Renewable resources – resources that will regenerate naturally within a reasonable time frame e.g.
Fruit, Trees, Vegetables
Non-renewable resources – resources that will not regenerate naturally within a reasonable time
frame e.g. Coal, Oil, Ores
Free good – goods that are available without limits e.g. air, sunlight
Economic good – goods that are scarce in comparison to people’s wants and need and therefore
must be paid for e.g. television, paper, electricity
Public (collective) good – goods that are non-excludable and non-rival
Non-excludable – once paid for, it is impossible to stop people from using the good or service. This
creates the ‘free rider’ problem
Non-rival – consumers do not have to rival each other for use of the good; it will not run out
Merit good – a commodity or service that is regarded by society or government as deserving public
finance e.g. education
Demerit good – a commodity or service that is regarded by society or government as not deserving
public finance e.g. cigarettes, alcohol
Consumer good – goods that are used and paid by individuals or groups in the household sector
Normal goods - goods we demand more of as our income increases e.g premium steak
Inferior goods - goods we demand less of as our income increases e.g second hand goods, ‘budget’
brand goods
Durable goods – goods that can be used more than once
Non-durable goods – goods that are perishable and do not last very long
Positive good – beneficial to society e.g. clean water, medicine
Negative good – a cost to society e.g. pollution, waste products
Disposable Income – the money remaining after taxes are paid. If taxes increase, disposable income
decreases
Semi-finished goods – goods that are used to produce other goods e.g. leather, wool
,Demand - The quantity of a good or service that a consumer is willing and able to purchase at
various prices at a certain time.
Law of Demand - as price increases, quantity demanded decreases, ceteris paribus and vice versa.
Demand Schedule – a table showing the quantity of a commodity consumers are willing and able to
buy at a range of prices.
Demand Curve - a graph showing the quantity of a commodity consumers are willing and able to buy
at a range of prices.
Market Demand - the total demand that all the individual consumers in the market are willing and
able to buy at various prices.
What changes demand? (Non-price factors of Demand)
Taste - things we like. They may be influenced by fashion, values, media, weather, seasons.
Income - the money we gain from labour. When we earn more income we are more able to
purchase goods and services, therefore we demand more normal goods, and demand a
lesser amount of inferior goods.
Complements - a good which is used in conjunction with another good
Substitutes - a good which can be used in place/instead of another.
Supply – The quantity of a good or service that a producer is willing and able to produce at various
prices at a certain time.
Law of Supply – as price increases, quantity supplied increases, ceteris paribus and vice versa.
Supply Schedule – a table showing the quantity of commodity producers are willing and able to
produce at various prices
Supply Curve – a graph showing the quantity of a commodity producers are willing and able to
produce at various prices
Market Supply – the total supply that all the individual producers in the market are willing and able
to produce at various prices
What changes supply? (Non-price factors of Supply)
Productivity – output per unit of input
Environmental – natural conditions which affect output
Taxes – payments made to govt., Subsidies – payments from govt. to firms for support
Restrictions on trade – Tariffs = tax on imports; Quotas = restriction on number of imports
Other related goods – different goods that can be produced using same resources/inputs
Legal – rules and regulations set by the government
Costs of production – costs that a firm/producer incurs during the production process
, Making a Curve:
Title - Who, What, When
Origin - Your graph must start from zero
Axes - Price on vertical, Quantity on horizontal (must be labelled)
Do the D/S – Place a D or S next to the line to show it is a demand curve or a supply curve
Scale - Graph must be even and consistent
Movements along the Curve:
A movement along the Curve occurs when a price factor changes
Draw dotted lines from both points to the axes
Draw arrows from the dotted lines to show the movement
Label the dotted lines: P, P1, Q, Q1, with P1 and Q1 on the dotted lines with new point
Shifts of the Curve:
A shift of the curve occurs when a non-price factor changes
A shift to the left means the Demand/Supply has decreased
A shift to the right means the Demand/Supply has increased
Draw dotted lines from where the change has occurred to the new axes
Draw arrows from the line indicating where the line has shifted
Label the new line D1 or S1 and Label the new and old quantities Q1 and Q
e.g.
P
P
P1
D D
D1
Q Q1 Q1 Q
Decrease in Price Decrease in Demand
P1
P
P
D
D1
D
Q1 Q Q Q1
Increase in Price Increase in Demand
Economics - The study of how scarce resources can be allocated to satisfy people’s unlimited wants.
Scarcity - When there are not enough resources to satisfy our wants and needs.
Resources - The inputs that are used in the production process to produce goods and services. These
are also called Factors of Production. Resources are limited.
Capital - Human-made goods that are used in the production of other goods. Payment
comes in Interest
Entrepreneurs (Enterprise) - The person who takes the risk and has the skills to combine the
other factors of production to produce goods and services. Payment comes in Profit
Labour - Human work or effort and the people who offer their services to businesses in
exchange for wages. Payment comes in Wages
Land - Any resource that exists as part of a natural process. Can be renewable or non-
renewable. Payment comes in Rent
Geographical mobility – the resource is capable of changing location
Occupational mobility – the resource is capable of changing use
Opportunity Cost - The next best alternative foregone e.g. Mary could buy lettuce or chips with her
$5 and she chose chips. Lettuce would be Mary’s opportunity cost.
Production possibility curve - a curve showing the maximum output of 2 products and combinations
of these products that can be produced given existing resources and technology.
This company used to produce 8
Computers and 35 Books (A) with the
A resources it had, but now it sells only 5
computers but 60 books (B).
Therefore, this business has an
B opportunity cost of 3 computers as it
decided to make more books.
,Consumer – people or firms who need or want goods and services
Producers – use resources to make goods and services to satisfy consumers’ needs and wants
Wants – what we desire but do not necessarily need to survive e.g. games, bags
Needs – what we must have in order to survive e.g. food, clothing, shelter
Renewable resources – resources that will regenerate naturally within a reasonable time frame e.g.
Fruit, Trees, Vegetables
Non-renewable resources – resources that will not regenerate naturally within a reasonable time
frame e.g. Coal, Oil, Ores
Free good – goods that are available without limits e.g. air, sunlight
Economic good – goods that are scarce in comparison to people’s wants and need and therefore
must be paid for e.g. television, paper, electricity
Public (collective) good – goods that are non-excludable and non-rival
Non-excludable – once paid for, it is impossible to stop people from using the good or service. This
creates the ‘free rider’ problem
Non-rival – consumers do not have to rival each other for use of the good; it will not run out
Merit good – a commodity or service that is regarded by society or government as deserving public
finance e.g. education
Demerit good – a commodity or service that is regarded by society or government as not deserving
public finance e.g. cigarettes, alcohol
Consumer good – goods that are used and paid by individuals or groups in the household sector
Normal goods - goods we demand more of as our income increases e.g premium steak
Inferior goods - goods we demand less of as our income increases e.g second hand goods, ‘budget’
brand goods
Durable goods – goods that can be used more than once
Non-durable goods – goods that are perishable and do not last very long
Positive good – beneficial to society e.g. clean water, medicine
Negative good – a cost to society e.g. pollution, waste products
Disposable Income – the money remaining after taxes are paid. If taxes increase, disposable income
decreases
Semi-finished goods – goods that are used to produce other goods e.g. leather, wool
,Demand - The quantity of a good or service that a consumer is willing and able to purchase at
various prices at a certain time.
Law of Demand - as price increases, quantity demanded decreases, ceteris paribus and vice versa.
Demand Schedule – a table showing the quantity of a commodity consumers are willing and able to
buy at a range of prices.
Demand Curve - a graph showing the quantity of a commodity consumers are willing and able to buy
at a range of prices.
Market Demand - the total demand that all the individual consumers in the market are willing and
able to buy at various prices.
What changes demand? (Non-price factors of Demand)
Taste - things we like. They may be influenced by fashion, values, media, weather, seasons.
Income - the money we gain from labour. When we earn more income we are more able to
purchase goods and services, therefore we demand more normal goods, and demand a
lesser amount of inferior goods.
Complements - a good which is used in conjunction with another good
Substitutes - a good which can be used in place/instead of another.
Supply – The quantity of a good or service that a producer is willing and able to produce at various
prices at a certain time.
Law of Supply – as price increases, quantity supplied increases, ceteris paribus and vice versa.
Supply Schedule – a table showing the quantity of commodity producers are willing and able to
produce at various prices
Supply Curve – a graph showing the quantity of a commodity producers are willing and able to
produce at various prices
Market Supply – the total supply that all the individual producers in the market are willing and able
to produce at various prices
What changes supply? (Non-price factors of Supply)
Productivity – output per unit of input
Environmental – natural conditions which affect output
Taxes – payments made to govt., Subsidies – payments from govt. to firms for support
Restrictions on trade – Tariffs = tax on imports; Quotas = restriction on number of imports
Other related goods – different goods that can be produced using same resources/inputs
Legal – rules and regulations set by the government
Costs of production – costs that a firm/producer incurs during the production process
, Making a Curve:
Title - Who, What, When
Origin - Your graph must start from zero
Axes - Price on vertical, Quantity on horizontal (must be labelled)
Do the D/S – Place a D or S next to the line to show it is a demand curve or a supply curve
Scale - Graph must be even and consistent
Movements along the Curve:
A movement along the Curve occurs when a price factor changes
Draw dotted lines from both points to the axes
Draw arrows from the dotted lines to show the movement
Label the dotted lines: P, P1, Q, Q1, with P1 and Q1 on the dotted lines with new point
Shifts of the Curve:
A shift of the curve occurs when a non-price factor changes
A shift to the left means the Demand/Supply has decreased
A shift to the right means the Demand/Supply has increased
Draw dotted lines from where the change has occurred to the new axes
Draw arrows from the line indicating where the line has shifted
Label the new line D1 or S1 and Label the new and old quantities Q1 and Q
e.g.
P
P
P1
D D
D1
Q Q1 Q1 Q
Decrease in Price Decrease in Demand
P1
P
P
D
D1
D
Q1 Q Q Q1
Increase in Price Increase in Demand
