IGCSE Economics: Introduction to Economics

IGCSE Economics: Introduction to Economics

The basic problem of economics is scarcity, which is the presence of limited resources but unlimited demand. Economics determines how resources are distributed because there are simply insufficient resources to satisfy everyone's needs. Even in rich countries, you can see poor people.

Economics is the study of how to make the best use of the resources we have. It's also about increasing people's choices, allowing them to see that there are other ways they can choose to utilize their resources.

Key Terms:

Domestic: Refers to one's own country.
Needs: Things that are necessary for survival such as food, clothing, shelter, water, and warmth.
Wants: Things that we would like to have but can do without, like cars, televisions, etc. We want things for different reasons but most of the time these reasons are things like peer pressure, desire for entertainment, convenience, and popularity, such as fashionable clothing.
Three Basic Economic Questions:

What goods and services should an economy produce? Should the emphasis be on agricultural goods, consumer goods, military goods, or services? Should it be on sport and leisure or on housing?
How should these goods and services be produced? Labor-intensive such as subsistence farming and food processing/manufacturing, or capital-intensive like car factory, milking cows, and large industrial farms? People decide which to use by determining their respective availabilities.

For example, in Hong Kong, more manufacturers choose to use machines as labor is very expensive.
Who should get the goods and services that are produced? Should there be an even distribution (Communistic)? More for the rich (Capitalistic)? More for those who work hard (Meritocratic)? Meritocracy is basically giving the "tools to Him that can best handle them".

Get quality help now

Sweet V

Verified

Proficient in: Economics

4.9 (984)

“ Ok, let me say I’m extremely satisfy with the result while it was a last minute thing. I really enjoy the effort put in. ”

+84 relevant experts are online

Hire writer

Factors of Production:

Land: Includes all natural resources like the ocean, forest, desert, grassland, crude oil, agriculture, ore, etc.
Labor: Includes all human effort, both physical and mental, like factory workers, managers, etc.
Capital: Refers to manufactured/man-made resources used in the production process of other goods, like plastic, tools, machinery, etc.
Enterprise: Represents the unique ability certain people have in organizing the factors of productions and to take risks, such as entrepreneurs like Bill Gates. The more available the factors of production used in the manufacturing of a certain good, the cheaper that good will be (for the producer).
The combination of factors of production change over time as a country develops. For example, a car factory in a LEDC will start off with a production line consisting of mainly laborers. As the country develops and machines become more available, the car factory will start using more machines as these become cheaper and are more productive than laborers.

Division of Labor, also known as job specialization, divides a firm’s labor force into small groups each doing special jobs for which they were trained. This technique, which was the brainchild of Henry Ford, provides both benefits and disadvantages.

Benefits of specialization include standardized products, an increase in the rate of production, time-saving, lower costs, and increased employment due to a rise in productivity.

Disadvantages of specialization include standardized and non-varied products, an inability for small businesses to compete due to their lack of necessary funds to employ so many workers at once, boring repetitive work for workers, which causes them to lose interest in their jobs and to think that their bosses do not care about them, and people becoming dependent on each other.

Sectors of the Economy:

Primary sector deals with the provision of raw materials and natural resources.