AS/A2 Economics

What is an economy?

 

Economic resources are scarce whilst human wants are infinite.  An economy is a system which attempts to solve this basic economic problem.  There are many different levels and types of economy.  There is the household economy, the local economy, the national economy and the international economy.  There are free market economies which attempt to solve the economic problem with the minimum intervention of government and command economies where the state makes most resource allocation decisions.  Although these economies are different, they all face the same problem.

 

Economists distinguish between three parts to the economic problem.

 

What is to be produced? An economy can choose the mix of goods to produce.  For instance, what proportion of total output should be spent on defence? What proportion should be spent on protecting the environment? What proportion should be invested for the future?

 

How is production to be organized?  For instance, are hi-fi systems to be made in the UK, Japan or Taiwan? Should car bodies be made out of steel or fibreglass?

 

For whom is production to take place? What proportion of output should go to workers? How much should pensioners get?

An economic system needs to provide answers to all these questions.

 

AS outline
At AS, candidates will develop an understanding of, and an insight into, micro and macroeconomics.
Microeconomics is the study of economics at the level of individual consumers, groups of consumers and firms.
Macroeconomics considers the performance of the economy as a whole.