Cambridge IGCSE and O Level Economics PDF

Cambridge IGCSE and O Level French as a Foreign Language Workbook Susan Grant Cam...

Cambridge IGCSE and O Level French as a Foreign Language Workbook Susan Grant Cambridge IGCSE® and O Level Economics Coursebook Second edition ✓ ✓ ✓ ✓ Copyright Material - Review Only - Not for Redistribution Copyright Material - Review Only - Not for Redistribution  R R R ev ev ev ie ie ie w w w C C C op op op y y y -C -C -C -C am am am am br br br br id id id id g e ge ge ge U U U U ni ni ni ni ve ve ve ve rs rs rs rs ity ity ity ity Pr Pr Pr es es es es s s s s -R -R -R -R ev ev ev ev ie ie ie ie w w w w C C C C op op op op y y y y Copyright Material - Review Only - Not for Redistribution Coursebook Cambridge IGCSE® and O Level Susan Grant Economics  ity rs ve y op ni U C ge w ie id University Printing House, Cambridge CB2 8BS, United Kingdom ev br One Liberty Plaza, 20th Floor, New York, NY 10006, USA am -R 477 Williamstown Road, Port Melbourne, VIC 3207, Australia -C 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India s es 79 Anson Road, #06–04/06, Singapore 079906 y Pr op Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of ity C education, learning and research at the highest international levels of excellence. rs w Information on this title: www.cambridge.org/ 9781108440387 ie ve y © Cambridge University Press 2018 ev op ni This publication is in copyright. Subject to statutory exception R U C and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written ge w permission of Cambridge University Press. ie id First published 2018 ev br 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 am -R Printed in Dubai by Oriental Press A catalogue record for this publication is available from the British Library -C s ISBN 978-1-108-44038-7 Paperback es y Pr Cambridge University Press has no responsibility for the persistence or accuracy op of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, ity C accurate or appropriate. Information regarding prices, travel timetables, and other rs w factual information given in this work is correct at the time of first printing but Cambridge University Press does not guarantee the accuracy of such information ie ve thereafter. y ev op ni IGCSE® is the registered trademark of Cambridge Assessment International Education R U C All examination-style questions, sample mark schemes, solutions and/or comments that ge appear in this book were written by the author. In examination, the way marks would be w awarded to answers like these may be different. ie id ev br NOTICE TO TEACHERS IN THE UK am -R It is illegal to reproduce any part of this work in material form (including photocopying and electronic storage) except under the following circumstances: -C (i) where you are abiding by a licence granted to your school or institution by the s es Copyright Licensing Agency; (ii) where no such licence exists, or where you wish to exceed the terms of a licence, y Pr and you have gained the written permission of Cambridge University Press; op (iii) where you are allowed to reproduce without permission under the provisions ity of Chapter 3 of the Copyright, Designs and Patents Act 1988, which covers, for C example, the reproduction of short passages within certain types of educational rs w anthology and reproduction for the purposes of setting examination questions. ie ve y ev op ni R U C e w g ie id ev br am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs ve y op ni U Contents C ge w ie id ev br am -R Introduction iv Section 4: Government and -C How to use this book vii the macroeconomy 213 s es y Section 1: The basic economic Pr Chapter 24 The role of government 214 op problem 1 Chapter 25 The macroeconomic aims ity C of government 219 rs w Chapter 1 The nature of the economic problem 2 Chapter 26 Fiscal policy 227 ie ve Chapter 2 Factors of production 6 Chapter 27 Monetary policy 237 y ev op ni Chapter 3 Opportunity cost 16 Chapter 28 Supply-side policies 243 R U C Chapter 4 Production possibility curves 20 Chapter 29 Economic growth 250 ge Exam-style questions 28 w Chapter 30 Employment and unemployment 260 ie id Chapter 31 Inflation and deflation 272 ev br Section 2: The allocation Exam-style questions 284 am -R of resources 33 Section 5: Economic -C s Chapter 5 Microeconomics and macroeconomics 34 development 289 es Chapter 6 The role of markets in allocating resources 38 y Pr op Chapter 7 Demand 43 Chapter 32 Living standards 290 iii ity C Chapter 8 Supply 53 Chapter 33 Poverty 298 rs w Chapter 9 Price determination 61 Chapter 34 Population 304 ie ve Chapter 10 Price changes 67 Chapter 35 Differences in economic y ev Chapter 11 Price elasticity of demand 73 development between countries 315 op ni R U Chapter 12 Price elasticity of supply 83 Exam-style questions 325 C ge Chapter 13 Market economic system 91 w Chapter 14 Market failure 101 Section 6: International ie id ev Chapter 15 Mixed economic system 111 br trade and globalisation 331 Exam-style questions 122 am -R Chapter 36 International specialisation 332 -C Section 3: Microeconomic Chapter 37 Free trade and protection 340 s es Chapter 38 Foreign exchange rates 348 decision makers 127 y Pr op Chapter 39 Current account of balance Chapter 16 Money and banking 128 of payments 358 ity C Chapter 17 Households 135 Exam-style questions 368 rs w Chapter 18 Workers 144 ie ve y Index 373 ev Chapter 19 Trade unions 162 op ni Chapter 20 Firms 169 Acknowledgements 383 R U C Chapter 21 Firms and production 181 e w g Chapter 22 Firms, costs, revenue and objectives 188 ie id Chapter 23 Market structure 201 ev br Exam-style questions 207 am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs ve y op ni U Introduction C ge w ie id ev br am -R This book is designed to introduce you to the study of economics and to help you progress through your IGCSE or O Level course. The book follows the structure of the IGCSE and -C s O Level course closely. es y The Coursebook is divided into 39 chapters. Each of these chapters explores a key economic Pr op topic and is based on a section of the syllabus. Each one has activities, multiple choice ity C questions and four-part questions to assess your understanding of the topic. In the first six rs w chapters, the four-part questions actually contain fewer than four parts. This is because ie ve economics is a subject where concepts build on each other. As more concepts are covered and y ev depth is built up, the four-part questions in the remaining chapters do have the full four parts. op ni R U Each chapter contains one or more tips. This may remind you of a key point, warn you about C a common confusion, give you advice on how to approach a question or recommend an ge w activity which will enhance your understanding. At the end, there is a summary of the main ie id points covered in the chapter. Throughout the book, there are links to parts of other chapters ev br where concepts can help you understand the topic. am -R The chapters have been arranged into six sections. At the end of each section, there are -C ten multiple choice questions, data questions and four-part questions covering the whole s es section. y Pr op iv Introduction to Economics ity C Economics is an important, well-respected and exciting subject. Economists play a key role rs w in the world. They give advice to firms and governments to improve their performance and ie ve y also comment on their success or failure. The work of economists can make a significant ev op ni difference to people’s lives. For instance, the policies they recommend to governments may R U C reduce poverty and improve the quality of the environment. ge w Whilst some of the people who study economics go on to become economists, others enter ie id a range of professions including accountancy, banking, education, journalism and the law. ev br Economists enjoy a lot of respect in universities and professional organisations. They regard am it as a rigorous subject that develops logical thinking and analytical and mathematical ability. -R There are certain concepts – such as opportunity cost and price elasticity of demand – -C s and certain topics – including price determination, unemployment and inflation – that are es central to economics. The subject, however, is ever changing as new theories develop, new y Pr op institutions are created and new problems are encountered. This makes it an interesting and challenging subject. ity C rs w The skills of an economist ie ve y ev op ni To be a good economist, you need to be informed of the developments in your economy and R U other economies. You need to be able to think and write clearly and apply relevant economic C terms and concepts. You need to be confident in handling figures. This involves being able e w g to add, divide, subtract, multiply, calculate percentage changes and understand index ie id ev br am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs Introduction ve y op ni U C numbers. You also need to be able to draw relevant, well-labelled and accurate diagrams. ge w This Coursebook is designed to help you develop these skills. ie id ev br Preparing for your examination am -R Revision is a continuous process. After every lesson, check your work and if necessary, add -C extra notes. As an examination approaches, you will need to do intensive revision. Try to s es engage in active revision. This involves, not just reading notes, but also using the information. y There are a number of ways in which you can do this. They include testing other members of Pr op your group, and getting them to test you, drawing spider diagrams and producing tables and ity C revision cards. rs w ie ve Examination technique y ev op ni It is not sufficient to have a sound knowledge and good skills in the subject. You also have to R U C demonstrate these under examination conditions. So, it is essential to develop examination ge techniques. w ie id Before an examination, check out the duration of the examination and the number of ev br questions you have to answer. Read the instructions on the examination paper carefully. am Do not rush into writing your answers. -R In answering multiple choice papers, consider every option in a question carefully. If you are -C s uncertain of an answer to a particular question, move on to the next one and return to the es question you were unsure of when you have answered the other questions. At the end, check y Pr op that you have answered all the questions. Never leave a question unanswered, even if you v have to guess. ity C In answering four-part questions read the questions very carefully, paying particular rs w ie attention to the command (instruction) words. A question which asks you to identify or state ve y ev something will only require a brief answer, consisting of a few words. In contrast, a question op ni which asks you to explain, analyse or discuss something will require a longer answer, written R U C in sentences and paragraphs. Unless specifically asked for, you should avoid writing a list. ge w The marks allocated to a question or part of a question should give you a clear indication ie id of the extent of detail required. It is often useful to include a diagram (or diagrams) in your ev br answers. These should be clear, accurate, well-labelled and backed up by an explanation am -R in the text. -C s Stretch content es y As well as covering all of the topics on your course, in places, the book goes beyond the Pr op syllabus to include concepts that stretch your understanding and provide you with possible ity C new ways to approach particular topics and strengthen the depth of your answers. These are marked in the book with a blue line next to them in the margin, and also listed in the table rs w below for your reference. ie ve y ev op ni R U C e w g ie id ev br am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs Cambridge IGCSE Economics ve y op ni U C Topic Where found in Coursebook ge w Allocative, productive and dynamic Chapter 13.4 Allocative efficiency, Chapter 13.5 Productive ie id efficiency efficiency and Chapter 13.6 Dynamic efficiency ev br am Cost benefit analysis Chapter 15.3 Government measures to address market -R failure (Effectiveness of government intervention) -C Average propensity to consume Chapter 17.1 Spending (Income and consumption) s es Average propensity to save Chapter 17.2 Saving (Income and saving) y Pr op Aggregate demand and aggregate Chapter 25.1 Government’s macroeconomic aims ity C supply analysis (Economic growth) rs w Purchasing power parity Chapter 32.1 Indicators of living standards (Comparing ie ve living standards between countries) y ev Genuine Progress Indicator, Gender Chapter 32.1 Indicators of living standards op ni Inequality Index. Happy Life Index and R U C Gross National Happiness ge w Multidimensional Poverty Index Chapter 33 The Multidimensional Poverty Index ie id Foreign aid Chapter 35.3 The impacts of differences in economic ev br development between countries (Measures to promote am -R economic development) Absolute and comparative advantage Chapter 36.2 Advantages and disadvantages of -C s specialisation at a national level (The advantages and es disadvantages for the economy) y Pr op vi Acknowledgement ity C rs w I would like to thank the team at CUP, particularly Susan Ross, Neil O’Regan and David ie ve Crosby, for their help and support. y ev op ni Susan Grant R U C ge w ie id ev br am -R -C s es y Pr op ity C rs w ie ve y ev op ni R U C e w g ie id ev br am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs ve y op ni U How to use this book C ge w ie id ev br am -R This book is designed as a practical guide to help build your knowledge and understanding of economic terms, principles and processes and assumes no prior knowledge of the subject. Carefully aligned to the -C s syllabus, it will help you to obtain the key skills required of an economist so that you can become confident es in applying these to reach reasoned conclusions about economic issues. y Pr op Each chapter focuses on a particular topic, and you will find a range of easy-to-follow pedagogical features to ity C guide you through it. Key terms are highlighted and there are regular opportunities for you to reflect on your rs w progress, check your understanding and practice the economic skills you have developed. ie ve y ev op ni Learning objectives R U C Each chapter begins by outlining the key economic ge concepts that you will learn. This will help you to w navigate your way through the book and remind you ie id ev what is important about each topic. br am -R -C s es Introducing the topic y These concise sections at the beginning of Pr op chapters open up an accessible entry point into vii ity C the topic you are about to learn. This could be a question that gets you thinking about an issue rs w relevant to that topic, or additional context ie ve y which helps you to understand how the topic ev op ni fits within real life scenarios. R U C ge KEY TERMS w TIP ie id Changes in demand: Find out what has happened to the size of your country’s labour force in the last ten years and why ev br curve. it has changed. am -R Increase in demand: a rise in demand Tip -C at any given price, Tip boxes provide reminders about key economic concepts, help on avoiding common s causing the demand es errors and tips to help you tackle trickier topics. y right. Pr op INDIVIDUAL ACTIVITY 1 ity C Decide, in each case, whether the following are likely to be an aim of a government, Key terms rs households or firms: w These definitions will help you to identify and understand a A shorter working week ie ve b important terminology and concepts within economics. y ev c op ni d Higher tax revenue R U C Link e w Individual Activity g LINK Links show you where you can find ie id additional information elsewhere in A series of questions and exercises designed to help ev Chapter 4.3 Movements br along a PPC the book about related topics. you check your progress and put your knowledge of a am -R particular topic into practice. -C s es Copyright Material - Review Only - Not for Redistribution  ity rs Cambridge IGCSE Economics ve y op ni U C Group Activity GROUP ACTIVITY 1 ge w Group activities encourage you to engage with your peers, Decide whether each of the following is a substitute or a complement to a Volkswagen car: ie id working in pairs or groups to share ideas and exchange a public transport ev b petrol br viewpoints on a particular economic issue. c a Ford car. am -R Summary Summary -C s You should know: Short sections at the end of each es Price is determined by the interaction of demand and supply. chapter provide a useful summary of y At the equilibrium price, demand is equal to supply. Pr op If a market is in disequilibrium initially, market forces will move it towards equilibrium. the key learning points covered in that If price is below the equilibrium price, there will be excess demand. chapter. ity C If price is above the equilibrium price, there will be excess supply. rs w ie ve y ev Multiple Choice Questions op ni At the end of each chapter you will find a series of multiple choice Multiple choice questions R U C 1 In which case is market failure occurring? questions which relate to the topic you have just covered in the ge A Consumers determining what is produced w chapter. Practising these will help you to check your progress at B Firms producing above the lowest possible cost ie id C Price falling as a result of a decrease in demand regular intervals through the book. D Price rising as a result of an increase in costs of production ev br am 2 A merit good is one which: -R A has an absence of external benefits Four-Part Questions B has higher private benefits than consumers realise -C At the end of each chapter, there will be an opportunity for you to s C imposes costs on those who are not involved in its production directly es D is both non-excludable and non-rival practice answering ‘four-part questions’. At the start of the book, y you will learn how to answer the first two parts, and gradually, as Pr 3 op viii you progress through the book you will be faced with full, four-part- A Basic necessities ity B Capital goods C questions to complete. C Demerit goods rs w D Public goods ie ve y ev Four-part question op ni Exam-style questions R U a (2) C Multiple Choice Questions b Explain why consumers are said to be sovereign in a market economic system. (4) ge 1 ‘Money enables people to borrow and lend’. Which function of money does this describe? w c Analyse the role of profit in a market economic system. (6) A measure of value ie id B medium of exchange d Discuss whether or not prices will be low in a market economic system. (8) C standard for deferred payment ev br D store of value am -R 2 What is a function of a commercial bank? A to control the money supply Exam-Style Questions B to decide on the amount spent by the government -C C to lend to individuals and firms s Exam-style questions, can be found at the end of each section D to manage the national debt es within the book. These are designed to help you to practise y 3 Pr answering the sort of questions you are likely to see in an exam. op A Low income groups save more, in percentage terms, than high income groups B Low income groups find it easier to borrow than high income groups C High income groups spend less, in percentage terms, than low income groups ity C D High income groups do not borrow money Stretch content rs w A blue line in the margin has been added to identify areas of 4 More people throughout the world visit the cinema. What impact is this likely to have on the demand for actors and their wages? ie ve content that go beyond the syllabus. You will not be expected to Demand for actors Wages of actors y ev A decreases decrease know and learn these for your course, but you may want to use op ni B decreases increase C increases increase R U them to challenge yourself further, and in some cases they may C D increases decrease help you better understand a concept you are learning. e 5 Which combination of events would increase a trade union’s ability to negotiate a wage w g rise for its members? ie id Labour productivity Unemployment A decreases decreases There are, nevertheless, risks attached even to a mixed economic system and there is no ev br B decreases increases guarantee that it will perform better than the other two types of systems. Market failure can C increases increases am occur and government intervention may make the situation worse. -R D increases decreases -C s es Copyright Material - Review Only - Not for Redistribution  R R R ev ev ev ie ie ie w w w C C C op op op y y y -C -C -C -C am am am am br br br br id id id id g e ge ge ge U U U U ni ni ni ni ve ve ve ve rs rs rs rs ity ity ity ity Pr Pr Pr es es es es s s s s -R -R -R -R ev ev ev ev ie ie ie ie SECTION 1 w w w w C C C C op op op op y y y y Copyright Material - Review Only - Not for Redistribution 1 The basic economic problem  ity rs ve y op ni U C ge w ie id ev br am -R -C s es y Pr op ity C rs w ie ve y ev op ni R U C ge w ie id ev br am -R Chapter 1 -C s es The nature of the economic problem y Pr op 2 ity C rs w Learning objectives ie ve y ev op ni By the end of this chapter you will be able to: R U C define and give examples of the economic problem ge w explain the difference between economic goods and free goods ie id ev br am -R Introducing the topic -C Do you have everything you would like to have? Some unfortunate people clearly need s es more goods and services. These are the people who lack the goods and services needed y for survival. If our needs for sufficient food, clothing and housing are met, we will still want Pr op KEY TERM other products. Indeed, our wants are unlimited. The richer we get, the more, and the ity C better, quality products we would like. Many of us would like, for instance, more foreign Wants: desires for rs w holidays and a new laptop. This chapter will look at why we cannot have everything we goods and services. ie ve would like. y ev op ni R U C e w g ie id ev br am -R -C s es Copyright Material - Review Only - Not for Redistribution  ity rs Chapter 1: The nature of the economic problem ve y op ni U C 1.1 Finite resources and unlimited wants ge w ie What stops people enjoying all the products they would like to have is a lack of resources to id KEY TERMS ev produce them. Resources, including workers and machinery, are scarce. This means that they br are limited in supply. The economic problem of not being able to satisfy everyone’s wants am Resources: factors -R arises because of this scarcity. used to produce goods and services. -C s There is no limit to people’s wants – they are infinite. For instance, people want more and The economic es better clothing, healthcare and improved transport infrastructure. The number of workers, problem: unlimited y Pr machines, offices, factories, raw materials and land used to produce these goods and op wants exceeding finite services, however, is finite. At any given time, for example, there are only a limited number resources. ity C of workers and they can produce only a specified amount. This mismatch, between what Scarcity: a situation rs w people want and the maximum that can be produced, gives rise to the economic problem. where there is not ie enough to satisfy ve Choices have to be made about how resources are to be used. y everyone’s wants. ev op ni The continuing nature of the economic problem R U C ge Scarcity continues to exist. More goods and services are being produced today than ever w before, but the growth in wants is exceeding the growth of economic resources. People still ie id want more products than the resources available can produce. Over a period of time, wants ev br continue to grow and change. am -R The economic problem in different contexts -C s es The fact that people have to choose which products to buy, which subjects to study, what jobs y to do and which products to produce shows that there are insufficient resources. As consumers, Pr op we cannot have everything we want. We have limited incomes. Students have to select which 3 ity C courses to study. It is not possible to study economics and chemistry at the same time. Workers have to make choices about what jobs they do. Some teachers may carry out other work in the rs w evening, but when they are teaching they are not working as writers! Time is in limited supply. ie ve y Producers have to decide what to make. Farmers cannot grow rice and wheat on the same land. ev op ni They