IGCSE Economics Notes

• Scarcity — Unlimited wants against limited resources. This forces every economic agent to choose.
• Factors of production — Land (rent), labour (wages), capital (interest), enterprise (profit). Each earns a reward.
• Opportunity cost — The next best alternative given up. Always state what is sacrificed, not just what is chosen.
• Production possibility curves (PPC) — Points on the curve are efficient, inside are wasteful, outside are unattainable. Outward shifts show economic growth.
• Specialisation & division of labour — Raises productivity and output, but risks boredom, over-dependence and structural unemployment.

• Market system — Price mechanism performs signalling, incentive and rationing functions.
• Demand — Inverse relationship with price. Shifters: income, tastes, price of substitutes/complements, population, expectations.
• Supply — Direct relationship with price. Shifters: costs of production, technology, taxes and subsidies, weather, number of firms.
• Equilibrium — Where demand meets supply. Excess demand pushes price up; excess supply pushes it down.
• Price elasticity of demand (PED) — % change in quantity ÷ % change in price. Inelastic goods (necessities, addictive goods) let firms raise price and total revenue.
• PES, YED and XED — Supply elasticity, income elasticity (normal vs. inferior goods) and cross elasticity (substitutes positive, complements negative).
• Market failure — Externalities, public goods, merit and demerit goods, monopoly power, information failure. Government responds with taxes, subsidies, regulation and direct provision.

• Money and banking — Functions of money: medium of exchange, store of value, unit of account, means of deferred payment. Commercial banks accept deposits, lend and enable payments.
• Households — Spending, saving and borrowing decisions depend on income, interest rates, confidence and age.
• Workers — Wage determination through labour demand and supply. Non-wage factors: job satisfaction, working conditions, promotion, holidays.
• Trade unions — Bargain for pay and conditions; strength depends on membership, skill scarcity and legislation.
• Firms — Size measured by employees, capital, output, market share. Growth is internal (organic) or external (merger/takeover).
• Costs, revenue and profit — Fixed vs. variable costs, average cost, total revenue = price × quantity, profit = TR − TC. Economies and diseconomies of scale shape average cost.

• Macroeconomic aims — Economic growth, low unemployment, price stability, balance of payments stability, fair income distribution. Aims often conflict.
• Fiscal policy — Government spending and taxation. Expansionary fiscal policy raises demand; contractionary cools inflation.
• Monetary policy — Interest rates and money supply, usually run by the central bank. Higher rates reduce borrowing and spending.
• Supply-side policy — Education and training, infrastructure, privatisation, deregulation, lower income tax. Improves long-run productive capacity.
• Economic growth — Measured by real GDP. Benefits: jobs, incomes, tax revenue. Costs: inflation, inequality, pollution, resource depletion.
• Unemployment — Types: frictional, structural, cyclical, seasonal. Measured by claimant count or labour force survey.
• Inflation and deflation — Demand-pull vs. cost-push inflation, measured by the CPI. Deflation can cause delayed spending and rising real debt.

• Living standards — GDP per head vs. the Human Development Index (income, education, life expectancy). Non-monetary indicators matter too.
• Poverty — Absolute vs. relative poverty. Policies: education, healthcare, progressive taxation, benefits, job creation, microfinance.
• Population — Birth rate, death rate, net migration; population pyramids show an ageing or youthful structure and its economic effects.
• Differences between countries — Income levels, productivity, education, health, infrastructure and technology explain development gaps.
• International trade & specialisation — Comparative advantage, benefits of trade, and arguments for protection (infant industry, dumping, jobs).
• Exchange rates & balance of payments — Appreciation makes exports dearer and imports cheaper (SPICED). Current account deficits can be corrected by expenditure-reducing or expenditure-switching policies.

• Define the key term in the first line of every answer — definition marks are the easiest marks on the paper.
• Draw and fully label diagrams (demand/supply, PPC, exchange rates). Label axes, curves and the shift direction with arrows.
• Use the command word: 'Identify' needs two words, 'Explain' needs cause and effect, 'Analyse' needs a chain of reasoning, 'Discuss' needs both sides plus a judgement.
• Build chains of reasoning: lower interest rates → cheaper borrowing → more investment → higher AD → growth.
• Apply to the case study or a real economy (Egypt, UK, USA) — context marks reward specific examples.
• For evaluation, always finish with 'it depends on…' (magnitude, time period, elasticity, government finances).

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