So perhaps you may want to skip this post.
Btw, I had GP and current affairs papers today.
GP = Hell.
Current affairs = Joke.
Let's start from the basics!
Factors of production:
(1) Capital
(2) Entrepreneurship
(3) Labour
(4) Land
Scarcity refers to the excess of human wants over what can be actually produced. As such, a choice must be made. This is because human wants are unlimited whereas resources are fixed. Thus, there is a need to allocate the fixed resources efficiently.
Likewise, choice involves scarcity. When a choice is made, opportunity cost is incurred.
Opportunity cost is the next best alternative forgone when a choice is made.
Production Possibility Curve shows all combinations of two goods being produced within a specific period of time with all its resources fully and efficiently utilised.
Shifts of the PPC:
(1) Improvement in technology
(2) Increase in resources
(3) Increase in productivity
Characteristics of a Free Market System:
(1) Limited or no government intervention
(2) Freedom of choice based on self-interest
(3) Private ownership of property
(4) Competition
(5) Use of price mechanism to allocate resources
Intermediate stage!
Theory of demand
Demand is defined as the amount of good a consumer is willing and able to buy at each possible price within a period of time, ceteris paribus.
Law of demand states that the quantity demanded and the price of the good is inversely related, ceteris paribus.
Law of Diminishing Marginal Utility states that as more and more units of commodity is consumed, the additional utility derived from each additional unit consumed falls.
Change of quantity demanded refers to the change in price of the good - movement along the curve.
Change in demand refers to change in non-price related factors of the good - shift in the curve.
Determinants of demand:
(1) Change in income level - Normal/Inferior Good
(2) Change in price of related goods - Substitutes/Complements
(3) Exchange rate - with reference to local currency
(4) Seasonal factors - GSS
(5) Change in size and composition of population
(6) Change in consumers' taste and preference - due to prevailing fashion, peers, trends etc
(7) Change in consumers' expectation - Taxes
Consumer surplus is the difference between the total amount of money consumers are willing to pay for a good and the total amount of money consumers actually paid.
Theory of supply
Suppy is defined as the amount of good producers are willing and able to produce at each possible price within a period of time, ceteris paribus.
Law of supply states that the quantity supplied of a good is directly related to its price, ceteris paribus.
Change in quantity supplied refers to the change in price of the good - movement along the curve.
Change in supply refers to the change in non-price related factors of the good - shift in curve.
Determinants of supply:
(1) Changes in weather conditions
(2) Changes in the cost of relevant resources
(3) Changes in state of technology
(4) Changes in price of related goods - Competitive/ Joint Supply
Producers surplus is the difference between the total amount of money producers actually received and the total amount of money they are prepared to receive.
Price Determination
A market refers to any situation where the buyers and producers can negotiate the exchange of a commodity/service.
Market equilibrium occurs at a price at which the quantity supplied by producers is equal to the quantity demanded by consumers.
Possible simultaneous change in DD and SS curves.
(Scenario 1)
DD increase = SS increase
DD increase > SS increase
DD increase < decrease =" SS"> SS decrease
DD decrease < increase =" SS"> SS decrease
DD increase < decrease =" SS"> SS increase
DD decrease < SS increase
Ok, it's getting boring here so I shall continue no more.
OMG! Let's party at Darren's house T17 tmr! *Glees*
Not forgetting full force mugging, as requested, with my lover on Saturday.
Till then.
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