Edexcel International GCSE Economics: every topic, by paper

What is the basic economic problem?

Resources are scarce but wants are unlimited, so choices must be made about how to use resources.

What is scarcity?

The situation where there are not enough resources to satisfy all wants.

Name the four factors of production.

Land, labour, capital and enterprise.

What is an economic system?

The way a country organises the production and distribution of goods and services.

What is a market economy?

An economy where resources are allocated by the price mechanism and most firms are privately owned.

What is a planned (command) economy?

An economy where the government decides what, how and for whom to produce, and owns most resources.

What is demand?

The quantity of a good or service that consumers are willing and able to buy at each price over a given period.

What is effective demand?

Demand backed by the ability to pay.

State the law of demand.

As price rises, quantity demanded falls (and as price falls, quantity demanded rises), other things equal.

What is the equilibrium price?

The price at which the quantity demanded equals the quantity supplied, so the market clears.

What is excess demand (a shortage)?

When quantity demanded is greater than quantity supplied at the current price.

What is excess supply (a surplus)?

When quantity supplied is greater than quantity demanded at the current price.

What does price elasticity of demand (PED) measure?

How responsive quantity demanded is to a change in the good's price.

What is the formula for PED?

PED = % change in quantity demanded ÷ % change in price.

Price rises by 10% and quantity demanded falls by 20%. What is PED?

−20% ÷ 10% = −2, so demand is price elastic.

What is market failure?

When the market does not allocate resources efficiently, producing too much or too little of a good.

What is a private cost?

A cost paid by the individual or firm that makes a decision, such as a factory's wage and fuel bills.

What is an external cost?

A cost suffered by a third party not involved in the transaction, such as pollution from a factory.

What are fixed costs?

Costs that do not change with output, such as rent and insurance.

What are variable costs?

Costs that change with output, such as raw materials.

How is total cost calculated?

Total cost = total fixed cost + total variable cost.

What is competition in a market?

Firms trying to win customers from each other, through price, quality or other features.

What is a competitive market?

A market with many firms, none big enough to control the price; entry is relatively easy.

What is a monopoly?

A market with a single supplier; in UK law a firm with over 25% market share can be treated as a monopoly.

What is the labour market?

The market where workers supply their labour and firms demand it; the wage is its price.

What is the demand for labour?

The number of workers firms want to employ at each wage rate; it is a derived demand.

Why is the demand for labour called a derived demand?

Firms want workers because of the demand for the goods and services those workers produce.

Name the main macroeconomic objectives of a government.

Economic growth, low unemployment, low and stable inflation, a stable balance of payments, and a fair distribution of income.

What is economic growth?

An increase in a country's output of goods and services, measured by real GDP.

What is gross domestic product (GDP)?

The total value of all goods and services produced in a country in a year.

What is fiscal policy?

Using government spending and taxation to influence the economy.

What is monetary policy?

Using interest rates and the money supply to influence the economy, usually by the central bank.

What are supply-side policies?

Policies to increase the productive capacity of the economy, such as education, training and cutting regulation.

What is money?

Anything widely accepted as a means of payment for goods and services.

Name the four functions of money.

Medium of exchange, store of value, unit of account and standard of deferred payment.

What is barter and why is it inefficient?

Swapping goods directly for other goods; it needs a double coincidence of wants and goods are hard to value and divide.

What is international trade?

The buying and selling of goods and services between countries.

What are exports and imports?

Exports are goods and services sold to other countries; imports are goods and services bought from other countries.

What is specialisation between countries?

Countries concentrate on producing the goods and services they can make most efficiently and trade for others.