143 Economics O Level | IGCSE Revision Notes

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Book Code: 143
Number Of Pages: 230
Author: Imran Latif
Language: English
Publishers: Read and Write Publications
ISBN Number:
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Economics O Level | IGCSE Revision Notes

Subject code 2281 / 0455 Article No. 143

The idea of writing notes for Cambridge O level Economics Notes came to me in 2003, when, having already taught for a year, I realized that no single economics book available in the local and international markets covered all the topics with the depth and perspective required by the CAIE syllabus. Both students and teachers had to consult 3 to 4 different books to find all the material that they needed—private candidates and new teachers had it even worse.

Writing of O Level Economics Notes

Furthermore, it was really difficult for students to keep having to refer through different books when the exams were close and they were starved for time. I took on the challenge and decided to write a comprehensive text that explicitly followed the syllabus and exam pattern of the CIE. A year and a half later, in the middle of 2004, I had finally written and published O level economics notes. Part of them had been hand-written, and part of them had been typed. Soon, word of their usefulness spread, and they were bought all over Pakistan.

Economics O Level Revision Notes

The Economics O Level Revision Notes had served their purpose well till the end of 2014. Till that point, there had only been minor changes in the syllabus. But now, there was a dire need to update them, for the new syllabus for the 2020-22 examination introduced some significant changes in course content.

I hope my efforts will help to contribute both to the learning of the student, as well as to the inquisitiveness of any teachers of A level economics, effectively. Your suggestions will help me improve the quality of the content for later editions and will be highly appreciated.

Topics covered in this book are as follows

UNIT 1:

THE BASIC ECONOMIC PROBLEM…………………………………………………… 14

1.1: THE NATURE OF BASIC ECONOMIC PROBLEM…………………………. 14

UNIT 2:

THE RESOURCE ALLOCATION (DEMAND SUPPLY AND EQUILIBRIUM ………………………………….. 24

DEMAND………………………………………………………………………………………… 24

SUPPLY…………………………………………………………………………………………. 30

MARKET EQUILIBRIUM AND DISEQUILIBRIUM………………………………… 35

INTERDEPENDENT MARKETS & PRICES………………………………………… 37

UNIT 3:

ELASTICITY…………………………………………………………………………………….. 42

INTERPRETING THE ELASTICITY FIGURES …………………………………….. 42

ELASTICITY OF DEMAND ……………………………………………………………….. 43

SIGNIFICANCE OF PED ………………………………………………………………….. 49

PRICE ELASTICITY OF SUPPLY (PES)……………………………………………… 52

SIGNIFICANCE OF PES…………………………………………………………………… 57

UNIT 4:

ECONOMIC SYSTEMS AND RESOURCE ALLOCATION DECISIONS …… 60

MICROECONOMICS AND MACROECONOMICS…………………………………. 60

KEY RESOURCES ALLOCATION DECISIONS (BASIC ECONOMIC QUESTIONS)……………………………………………………………………………………. 60

ECONOMIC SYSTEMS ……………………………………………………………………… 61

UNIT 5:

MARKET FAILURE AND GOVERNMENT INTERVENTION………………………………………. 64

CAUSES AND CONSEQUENCES OF MARKET FAILURE: …………………………………………………………………….. 65

GOVERNMENT INTERVENTION TO ADDRESS MARKET FAILURE…………………………………………………………. 68

POLICIES TO CORRECT MARKET FAILURE OF NEGATIVE EXTERNALITIES AND DEMERIT GOODS……………………………… 68

POLICIES TO CORRECT MARKET FAILURE OF POSITIVE EXTERNALITIES AND MERIT GOODS ………………………………… 71

POLICIES TO CORRECT MARKET FAILURE OF PUBLIC GOODS ………………………………………………………………. 72

POLICIES TO CORRECT THE MARKET FAILURE OF IMPERFECT MARKETS ………………………………………………………… 72

THE GOVERNMENT AS A PRODUCER AND AN EMPLOYER………………………………………………… 72

THE GOVERNMENT AS AN EMPLOYER ……………………………………………………………. 73

UNIT 6:

MONEY AND BANKING ……………………………………………………….. 76

MONEY ……………………………………………………………………………… 76

BANKING …………………………………………………………………………….. 79

UNIT 7:

HOUSEHOLDS ……………………………………………………………………….. 82

INCOME……………………………………………………………………………………. 82

SPENDING/CONSUMPTION……………………………………………………………….. 82

SAVINGS …………………………………………………………………………………… 84

BORROWING………………………………………………………………………………….. 85

DIFFERENCES IN EXPENDITURE PATTERNS OF DIFFERENT INCOME GROUPS ……………………………………….. 86

UNIT 8:

WORKERS AND TRADE UNIONS ……………………………………………………. 88

WORKERS ……………………………………………………………………………………. 88

TRADE UNIONS ……………………………………………………………………….. 96

WAGE DIFFERENTIALS………………………………………………………………….. 99

UNIT 9:

FIRM’S PRODUCTION AND COST……………………………………………………….. 104

METHODS OF PRODUCTION: ………………………………………………………….. 105

COST OF PRODUCTION…………………………………………………………… 106

REVENUE, PROFIT, LOSS & BREAK EVEN……………………………………………. 109

UNIT 10:

CLASSIFICATION OF FIRMS………………………………………………………. 112

CLASSIFICATION OF FIRMS………………………………………………………………… 112

CAUSES AND FORMS GROWTH OF FIRMS………………………………………………… 112

RETURNS TO SCALE………………………………………………………………………. 114

ECONOMIES AND DISECONOMIES OF SCALE…………………………………………………… 114

SMALL FIRMS: ……………………………………………………………………………………. 116

UNIT 11:

MARKET STRUCTURES AND BUSINESS OBJECTIVES…………………………………………. 120

OBJECTIVES OF FIRMS…………………………………………………………………….. 120

UNIT 12:

MARKET STRUCTURES …………………………………………………………………… 126

MARKET STRUCTURES …………………………………………………………………………… 126

ARE MONOPOLIES ALWAYS BAD FOR CONSUMERS?………………………………………………………. 129

UNIT 13:

BASIC MACROECONOMIC IDEAS………………………………………………………….. 132

SECTORS AND TYPES OF ECONOMIES: ………………………………………………………………………………. 133

AGGREGATE DEMAND (AD):…………………………………………………………………… 133

AGGREGATE SUPPLY (AS)……………………………………………………………………….. 137

INTERACTION OF AGGREGATE DEMAND AND AGGREGATE SUPPLY AND NATIONAL INCOME EQUILIBRIUM………………………….. 138

CHANGES IN NATIONAL INCOME EQUILIBRIUM …………………………………………………………………. 139

BUSINESS (TRADE) CYCLE…………………………………………………………………….. 140

CAUSES OF RECESSION ……………………………………………………….. 141

CONSEQUENCES OF RECESSION………………………………………………………………. 142

UNIT 14:

EMPLOYMENT AND UNEMPLOYMENT………………………………………. 144

DEFINITION OF EMPLOYMENT AND UNEMPLOYMENT…………………………………………………….. 144

THE CAUSES OF UNEMPLOYMENT………………………………………………………………………………. 144

FULL-EMPLOYMENT / NATURAL RATE OF UNEMPLOYMENT (NRU)…………………………………………….. 146

THE CONSEQUENCES OF UNEMPLOYMENT……………………………………………………………. 147

POLICIES TO CORRECT UNEMPLOYMENT……………………………………………………. 147

THE PATTERN AND TRENDS IN (UN)EMPLOYMENT…………………………………………………. 148

MEASUREMENT OF UNEMPLOYMENT…………………………………………………………………….. 148

UNIT 15:

INFLATION AND DEFLATION …………………………………………………….. 152

DEFINITION OF INFLATION AND DEFLATION………………………………………………………… 152

MEASUREMENT OF INFLATION/ DEFLATION/ COST OF LIVING …………………………………………….. 153

THE CAUSES OF INFLATION……………………………………………………………………. 156

THE CONSEQUENCES OF INFLATION………………………………………………………………….. 158

CAUSES AND CONSEQUENCES OF DEFLATION ……………………………………………………… 161

UNIT 16:

ECONOMIC GROWTH…………………………………………………………………………. 164

DEFINITION AND MEASUREMENT OF ECONOMIC GROWTH:…………………………………………. 164

CONSEQUENCES OF ECONOMIC GROWTH…………………………………………………………… 166

UNIT 17:

LIVING STANDARD…………………………………………………………………. 168

GDP AND STANDARD OF LIVING………………………………………………………….. 169

UNIT 18:

POVERTY …………………………………………………………………………………………. 174

INCOME AND WEALTH INEQUALITY …………………………………………………………………………………………………………. 174

THE NATURE AND CAUSES OF POVERTY……………………………………………………………….. 174

UNIT 19:

POPULATION ……………………………………………………………………. 178

SIZE OF POPULATION………………………………………………………………………… 178

POPULATION PYRAMIDS………………………………………………………………………………………….. 181

AGEING POPULATION ……………………………………………………………………………………………. 183

UNIT 20:

DIFFERENCES OF ECONOMIC DEVELOPMENT BETWEEN COUNTRIES………………………………… 186

ECONOMIC DEVELOPMENT………………………………………………………………………………….. 186

UNIT 21:

INTERNATIONAL TRADE…………………………………………………………….. 190

THEORIES OF INTERNATIONAL TRADE: ……………………………………………………………………………. 190

PROTECTIONISM………………………………………………………………………………………… 190

THE ARGUMENTS IN FAVOUR OF FREE TRADE AND AGAINST PROTECTIONISM……………………………………………… 193

THE ARGUMENTS IN FAVOUR OF PROTECTIONISM AND AGAINST FREE TRADE………………………………………….. 194

MULTINATIONAL CORPORATIONS (MNC)…………………………………………………………… 196

UNIT 22:

EXCHANGE RATE……………………………………………………………………………….. 200

DEFINITIONS AND MEASUREMENT OF EXCHANGE RATES………………………………………………………………. 200

EXCHANGE RATE SYSTEMS ………………………………………………………………………………………………………….. 200

CAUSES OF EXCHANGE RATE DEPRECIATION…………………………………………………………….. 204

CAUSES OF EXCHANGE RATE APPRECIATION……………………………………………………….. 206

EFFECTS OF DEPRECIATION/DEVALUATION ……………………………………………………………………. 207

EFFECTS OF APPRECIATION/REVALUATION…………………………………………………………… 209

ADVANTAGES AND DISADVANTAGES OF EXCHANGE RATE SYSTEMS: ……………………………………………………. 211

UNIT 23:

BALANCE OF PAYMENTS…………………………………………………………………….. 216

COMPONENTS OF THE BALANCE OF PAYMENTS………………………………………………………… 217

BALANCE OF PAYMENT DISEQUILIBRIUM ……………………………………………………………………………………………………. 220

CAUSES OF BALANCE OF PAYMENT DISEQUILIBRIUM ………………………………………………………. 220

CONSEQUENCES OF A CURRENT ACCOUNT DEFICIT AND A CURRENT ACCOUNT SURPLUS………………………………… 221

UNIT 24:

MACROECONOMIC POLICIES ……………………………………………………………. 224

TAXATION ……………………………………………………………………………………. 225

GOVERNMENT MACROECONOMIC AIMS: …………………………………………………………………………………………………… 228

CONFLICTS AMONG MACROECONOMIC AIMS:……………………………………………………………………………………………… 229

MACROECONOMIC POLICIES:………………………………………………………………………………….. 230

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