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Also available… My Revision Notes: OCR GCSE (9-1) Economics Target success with this proven formula for effective, structured revision.  Topic-by-topic planner  Clear and focused coverage  ’Check your understanding’ activities  Practice questions  Tips and guidance  End-of-topic ‘I can’ checklists Our clear and concise approach to revision will help you learn, practise and apply your skills and understanding. Coverage of key content is combined with practical study tips and effective revision strategies to create a guide that can be relied on to build both knowledge and confidence. Find out more and order online at www.hoddereducation.co.uk/gcse-economics-ocr-mrn The Student Book has been endorsed by OCR. This revision guide, My Revision Notes: OCR GCSE (9-1) Economics, was not submitted for endorsement by OCR. My Revision Notes OCR GCSE (9-1) Economics IFC ad 216x276.indd 1 11/04/2022 13:38 351950_FM_OCR_GCSE_Econ_i-x.indd Page 1 14/04/22 11:18 AM user /146/HO02495/work/indd OCR GCSE GCSE (9–1) (9–1) ECONOMICS JAN MILES-KINGSTON CLIVE RICHES CHRISTOPHER BANCROFT 351950_FM_OCR_GCSE_Econ_i-x.indd Page 2 12/04/22 10:17 AM user /146/HO02495/work/indd Endorsement statement The teaching content of this resource is endorsed by OCR for use with specification GCSE (9-1) Economics (J205). All references to assessment, including assessment preparation and practice questions of any format/style, are the publisher’s interpretation of the specification and are not endorsed by OCR. This resource was designed for use with the version of the specification available at the time of publication. However, as specifications are updated over time, there may be contradictions between the resource and the specification; therefore please use the information on the latest specification and Sample Assessment Materials at all times when ensuring students are fully prepared for their assessments. Endorsement indicates that a resource is suitable to support delivery of an OCR specification, but it does not mean that the endorsed resource is the only suitable resource to support delivery, or that it is required or necessary to achieve the qualification. OCR recommends that teachers consider using a range of teaching and learning resources based on their own professional judgement for their students’ needs. OCR has not paid for the production of this resource, nor does OCR receive any royalties from its sale. For more information about the endorsement process, please visit the OCR website. Every effort has been made to trace all copyright holders, but if any have been inadvertently overlooked, the Publishers will be pleased to make the necessary arrangements at the first opportunity. Although every effort has been made to ensure that website addresses are correct at time of going to press, Hodder Education cannot be held responsible for the content of any website mentioned in this book. It is sometimes possible to find a relocated web page by typing in the address of the home page for a website in the URL window of your browser. Hachette UK’s policy is to use papers that are natural, renewable and recyclable products and made from wood grown in well-managed forests and other controlled sources. The logging and manufacturing processes are expected to conform to the environmental regulations of the country of origin. Orders: please contact Hachette UK Distribution, Hely Hutchinson Centre, Milton Road, Didcot, Oxfordshire, OX11 7HH. Telephone: +44 (0)1235 827827. Email: [email protected]. Lines are open from 9 a.m. to 5 p.m., Monday to Friday. You can also order through our website: www.hoddereducation.co.uk. ISBN: 978 1 3983 5195 0 © Jan Miles-Kingston, Clive Riches, Chris Bancroft 2022 First published in 2017 This edition published in 2022 by Hodder Education An Hachette UK Company Carmelite House 50 Victoria Embankment London EC4Y 0DZ www.hoddereducation.co.uk Impression number Year 5 4 3 2 1 2026 2025 2024 2023 2022 All rights reserved. Apart from any use permitted under UK copyright law, no part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or held within any information storage and retrieval system, without permission in writing from the publisher or under licence from the Copyright Licensing Agency Limited. Further details of such licences (for reprographic reproduction) may be obtained from the Copyright Licensing Agency Limited, www.cla.co.uk Cover photo © maxsattana - stock.adobe.com Typeset in India Printed in Bosnia & Herzegovina A catalogue record for this title is available from the British Library. 351950_FM_OCR_GCSE_Econ_i-x.indd Page 3 15/04/22 11:39 AM user /146/HO02495/work/indd Introduction Get the most from this book This textbook will allow you to build your knowledge of GCSE economics and understand its impact beyond the classroom. Special features /146/HO02495/work/indd AM user 4.indd Page 156-157 15/04/22 11:29 351950_03_OCR_GCSE_Econ_121-22 3.4 Price stability Topic 3.4 Price stability Table 3.4.1 Prices of a selection of items in two consecutive years Item Pringles, tube Own-brand hummus crisps Bus ride to town Mars bar × 2 Learning outcomes be able to: After studying this topic, you should the price stability and inflation, including explain what is meant by values difference between real and nominal using the Consumer Price Index explain how inflation is measured Learning outcomes Own-brand chocolate bar × 5 Tropicana orange juice, small Own-brand fresh orange, large bottle Magazine (CPI) A summary of the learning objectives for each topic. Key terms Quantitative skills Activity Takeaway taco on prices calculate the effect of inflation Fresh fruit inflation figures analyse recent and historical evaluate the causes of inflation Key terms we first need to To understand price stability and inflation, The general price level price level. familiarise ourselves with the general and services in an economy at is the measure of overall prices of goods expressed as an index (see later in a particular point of time. It is often Cost of living The price level of goods and services bought (by the average family). Concise definitions of key terms where they first appear. A typical trolley of goods may cost considerably more after a few years of inflation 2.50 2.70 1.00 1.10 2.00 2.50 1.00 1.20 1.00 1.00 1.00 1.20 1.00 1.00 2.00 2.50 2.50 3.00 1.00 1.10 Activity 1 Assume you have with £10 in Year 1. a Choose what you would buy with £10 in Year 2. b Choose what you would buy your standard of living would have 2 Discuss in small groups how changed. What are price stability and inflation? Inflation A sustained rise in the general price level over time. Year 2 both years. a fixed budget of £10 a week in and the consequences for the government consumers, producers, savers and Price stability When the general level of prices stays constant over time, or grows at an acceptably low rate. This symbol shows that quantitative skills are covered. Price (£) Year 1 What is the rate of inflation? rise in the general level of The rate of inflation is the percentage as an annual rate of inflation. prices over time. It is usually expressed a 4% increase in the general level of For example, if an economy has had is 4%. prices over time, the rate of inflation this topic). price level stays constant over Price stability occurs when the general a general price level index of 100 time. For example, if an economy has of 100 on 1 January 2023, then on 1 January 2022 and still has an index price stability. In practice, over the year that economy has experienced low rate over time, this is also if the price level grows at an acceptably considered as price stability. price level in an economy Inflation is a sustained rise in the general a whole, on average, rise over time. over time. This means that prices as of inflation that the prices of Note that it is possible during a period in the UK, while inflation was some individual items fall. For example, as flat-screen televisions and positive, the prices of some goods such DVD players were falling. that consumers buy rises, When the price level of goods and services as much as before. purchase not this means that their money will as a fall in the purchasing Therefore, inflation could also be defined more to buy the same power of money. It now costs consumers the cost of living has gone up. goods and services as before, so that and services on goods of quantity certain a For example, £100 buys buy the same products on 1 January 1 January 2022. If £103 is required to £100 has fallen: it can no longer 2023, then the purchasing power of the buy all the products. Can the rate of inflation be negative? Task-based activities to help you consolidate learning. Key term Rate of inflation The percentage rise in the general price level over time. the general price level falls Inflation can be negative. In this situation, economies at various times. One over time. This has happened in some level falling for most of the years example is Japan, which saw the price between 1998 and 2013. economy but has occurred in Negative inflation is unusual in the UK October 2015. recent times, including September and Study tip Study tip price level rising. If the price Inflation always refers to the general (e.g. the price of a new electric of a specific good or service rises this in itself is not referred to car, a chocolate bar or a holiday), Key areas of understanding highlighted. as inflation. 157 156 Now test yourself Short, knowledge-based questions to check your understanding. /146/HO02495/work/indd PM user.indd Page 58-59 14/04/22 1:30 351950_02_OCR_GCSE_Econ_019-092 2.3 Supply OCR GCSE (9-1) Economics Evaluate this Brief tips which identify how you can move from understanding the concepts, to applying and evaluating. Evaluate this and your own Using the information in this topic producers should knowledge, evaluate the view thatthe price elasticity of always try to increase the value of supply of their products. what is meant by evaluate before Check that you fully understand ix for advice on this technique. answering this question – see p. Case study The producer and price elasticity supply that TCR Sports Ltd One suggestion Mila made was of goods were should try to ensure that its stocks easily available. of Ltd was The operations director of TCR Sports respond quickly worried that if the firm could not foreign firms that enough, it would lose orders to director asked were more flexible. The operations to increase Mila if she could advise him on how firm’s products. the price elasticity of supply of the Follow-up questions 1 What is meant by price elasticity in the 2 Other than the suggestion and your own Using the information in this topic of price elasticity of knowledge, evaluate the importance supply to consumers. what is meant by evaluate before Check that you fully understand ix for advice on this technique. answering this question – see p. Progress check Progress check you should be able to: Now you have finished this topic, explain what is meant by supply supply curves draw and explain, using data, individual supply curves draw and explain, using data, market for consumers and analyse the causes and consequences curve producers of shifts in the supply consumers and for analyse the causes and consequences the supply curve producers of movements along draw shifts in the supply curve curve draw movements along the supply explain price elasticity of supply elasticity draw supply curves of different elasticity of supply for evaluate the importance of price consumers and producers An end-of-topic summary of what you should know. of supply? case study, how the PES of its else could TCR Sports Ltd increase products? Extension material Table 2.3.5 Supply schedule Price (£) 2 4 6 8 10 12 14 Quantity 4 6 8 10 12 14 16 Extension material in calculate the PES for each change 1 Using the data in Table 2.3.5, price, e.g. £2 to £4. of the supply curve?’, you were 2 In the section ‘What causes shifts In pairs, write down two more given some of the possible causes. share your ideas with the rest of possible causes. You could then add and accepts that the class the class. Make a class list of those Case study Topical examples, with questions, to make economic concepts real. Evaluate this Now test yourself sure your definition is accurate. 3 Define elasticity of supply. Make. supply is said to be price ………… 4 If the value of PES is 0.8 then happens to the change in price 5 If PES is said to be elastic, what up the supply curve? and quantity as there is a movement affect the consumer? this might how 6 If PES is inelastic, can try to increase its 7 Give four ways in which a producer elasticity of supply. them to your notes. it how it tries to make its supply 3 Contact a local firm and ask changes in price). If several of more elastic (more responsive to research with the rest of the you do this, you could share your class. 59 58 Additional content, building knowledge and skills for students aiming at the top grades. iii 351950_FM_OCR_GCSE_Econ_i-x.indd Page 4 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd Contents Introduction............................................................................................................. vi Part 1 Introduction to economics 1.1 Main economic groups and factors of production...................................... 2 1.2 The basic economic problem...................................................................... 11 Part 2 The role of markets and money 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 The role of markets....................................................................................... 20 Demand......................................................................................................... 34 Supply............................................................................................................ 49 Price 60 Competition.................................................................................................. 69 Production..................................................................................................... 79 The labour market........................................................................................ 93 The role of money and financial markets...................................................103 Practice questions: Paper 1.........................................................................115 Part 3 Economic objectives and the role of government 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 iv Economic growth.........................................................................................122 Low unemployment.....................................................................................133 Fair distribution of income..........................................................................144 Price stability................................................................................................156 Fiscal policy..................................................................................................171 Monetary policy...........................................................................................192 Supply side policies.................................................................................... 202 Limitations of markets................................................................................ 212 351950_FM_OCR_GCSE_Econ_i-x.indd Page 5 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd Part 4 International trade and the global economy 4.1 4.2 4.3 4.4 Importance of international trade.............................................................. Balance of payments................................................................................... Exchange rates............................................................................................. Globalisation................................................................................................ Practice questions: Paper 2......................................................................... 226 234 245 255 268 Glossary................................................................................................................ 273 Acknowledgements............................................................................................. 277 Index..................................................................................................................... 278 v 351950_FM_OCR_GCSE_Econ_i-x.indd Page 6 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd OCR GCSE (9-1) Economics Introduction Welcome to GCSE economics This book has been especially written to accompany the OCR GCSE economics course. Starting this GCSE course can be an exciting new challenge for you as a student. Economics is the study of how choices are made in the use of scarce resources to provide goods and services. At the beginning of an economics course, you are not expected to know about the economy in detail, as this is a new subject and it is different in many important respects from others you may have previously studied. However, it won’t all be new to you. Economics is largely about people and their economic choices. It is all around us and relates to every aspect of our lives – we are all part of the economy. Therefore, although it may be a new subject of study, you have experience of economics in your day-to-day life. The economy is the state of a country or region in terms of the production and consumption of goods and services. So we often refer, for example, to the UK economy and to the global economy. You are already a member of one of the main groups in the economy – you are a consumer. You buy goods and services every day, so that makes you an important part of the economy! When you decide what to spend your money on, you are making an economic decision. When you are in your economics class, you are a consumer, as you are consuming the service of education. In the future, you will probably be a worker and earn an income from selling your services. You may even be your own boss (an entrepreneur perhaps), making decisions that will affect your business and profits. During this economics course, you will appreciate that consumers, producers and governments make economic decisions that affect every one of us as an individual. As economics is a real-life subject, it will help if you become interested in the economic issues of your own country, and in the world as a whole. Economic issues and situations make daily news. Therefore, it would be a good idea to read or listen to the news once a day, as you will be able to identify issues that you are studying on this course. To reiterate, you are not expected to possess any economics-specific knowledge at the beginning of this course – you will pick it up as your course progresses. There is a new vocabulary to learn, and tools, such as diagrams, that you will learn to use at the relevant time. You will also develop useful skills beyond economics – you will learn to form questions and arguments, communicate and problem solve. By learning how to use economic data from a range of sources, such as tables, charts and graphs, you will acquire the skills to make informed judgements and to communicate in a clear and concise way. In addition, by learning how to analyse and evaluate economic problems and possible solutions, you will acquire a way of thinking as an economist and develop a logical approach to thinking and reasoning. You could say that at the end of this course you will be an economist! vi 351950_FM_OCR_GCSE_Econ_i-x.indd Page 7 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd Introduction How to use this book There are four main sections to this book, which correspond with the four content areas of the GCSE economics specification. Part 1: Introduction to economics is covered over two topics. Part 2: The role of markets and money is covered over eight topics. Part 3: Economic objectives and the role of government is covered over eight topics. Part 4: International trade and the global economy is covered over four topics Economics is sometimes referred to in two parts: microeconomics and macroeconomics. Microeconomics is concerned with economic behaviour in the individual markets that make up the economy, and is mainly the subject matter of Parts 1 and 2. Macroeconomics attempts to explain how the whole economy works, and is mainly the subject matter of Parts 3 and 4. In practice, there are many interrelated issues in economics, so you will find cross-references between different parts of the book. In each topic, you will find the information required to build up your knowledge and understanding of economics. In addition, knowledge and understanding of economic concepts and issues will be applied in a variety of contexts. There will also be analysis using economic concepts and evaluation of economic evidence. There is more about these skills below. Extension material also provides extra content beyond GCSE level, which will help you be an even better economist. The questions following the case studies and the activities are designed to have open-ended responses, so we have not provided any answer guidance here. The Now test yourself questions and the practice questions do have answer guidance, available online at: www.hoddereducation.co.uk/subjects/economics/products/14-16/ ocrgcse-economics. What will the GCSE economics exam be like? At the end of the course, you will sit two examination papers. Each paper will be 90 minutes in length and will be worth 80 marks, and each will be worth 50% of the final GCSE grade. Paper 1 Introduction to economics will mostly, but not exclusively, contain content from Parts 1 and 2 of this book, namely: Introduction to economics The role of markets and money Paper 2 National and international economics will mostly, but not exclusively, contain content from Parts 3 and 4 of this book, namely: Economic objectives and the role of government International trade and the global economy vii 351950_FM_OCR_GCSE_Econ_i-x.indd Page 8 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd OCR GCSE (9-1) Economics Each paper will have two sections. Section A will have 20 multiple-choice questions. Section B will have three data-response questions. Each dataresponse question will be worth 20 marks, broken down into parts. You can see how these questions are structured, as we have included practice questions in this book. There will be no choice between questions – you will be asked to answer all questions on each paper. Synoptic assessment is found in each of the 6-mark parts of questions in Section B of both papers. Synoptic assessment means that you may be asked to draw on your knowledge and understanding from the full range of content in the specification (and not just from the half of the content that the exam focuses on). This is important, as it means that you cannot rely on simply revising half the course when preparing for one particular paper. To do well in the exam, you must have a good knowledge and understanding of economics and be able to analyse and evaluate when asked to do so. The assessment objectives (AOs) refer to these necessary skills and are as follows. AO1: demonstrate knowledge and understanding of economic concepts and issues. AO2: apply knowledge and understanding of economic concepts and issues to a variety of contexts. AO3: analyse (AO3a) and evaluate (AO3b) economic evidence and issues to demonstrate understanding of economic behaviour, make judgements and draw conclusions. It is useful to know the importance of each assessment objective (AO). AO1 is 35% of each paper. AO2 is 35% of each paper. AO3 is 30% of each paper. Given the allocations in the assessments for each of these AOs, it is imperative that you recognise command words used in questions and answer accordingly. The most important command words used in the exam are explained below, including the AO to which they relate. State: refers to the ability to demonstrate or apply knowledge and understanding. In some cases, this may simply require a one-word answer (AO1 and AO2). Explain: refers to the ability to: demonstrate knowledge and understanding by stating a definition, explaining a concept or giving an example (AO1) apply knowledge and understanding to a context (AO2) Draw: refers to the ability to construct and label a diagram appropriately (AO1 and AO2). Calculate: refers to the ability to apply quantitative skills (AO1 and AO2). viii 351950_FM_OCR_GCSE_Econ_i-x.indd Page 9 26/03/22 9:29 PM elhiddn /146/HO02495/work/indd Introduction Analyse: refers to the ability to present logical chains of reasoning based on knowledge and application (AO1, AO2 and AO3a). Evaluate: refers to the ability to weigh up both sides of the argument, or to compare alternatives, and to come to a supported judgement (AO2, AO3a and AO3b). Advice on evaluation technique Evaluation is a key skill for economists. It helps them weigh up decisions and put forward informed judgements and advice. In GCSE economics, the skills of analysis and evaluation are tested in the ‘Evaluate’ questions that are worth 6 marks. Different questions may require slightly different approaches to evaluation. For example, a question may ask whether benefits outweigh costs. One approach is to start with analysis of the benefits and costs that are most significant and likely to occur. The next step is to evaluate, which will weigh up the benefits and/or costs discussed and lead to an overall judgement that answers the exact question wording set. For this style of question, it is important to go beyond an answer that is purely analysis of both the benefits and costs. Another example is a question that asks whether a government should intervene in a market. In this case, it may be useful to analyse the key argument(s) for intervention and the likely consequences. Evaluation can then pull apart any part of the chains of reasoning for analysis, so that the consequence reasoned may not happen or may not happen as fully. A judgement can then be made, supported by the side of the argument that can be explained to be stronger. Here is a summary of the assessment objectives and skills needed for an ‘Evaluate’ question. AO2 Application Use the context of the given scenario throughout your answer. For instance, keep linking your answer to the specific market mentioned in a question. Your answer should also link to the exact question wording used. AO3a Analysis Develop chain(s) of reasoning that link together key steps in the theory to explain one side of your answer. Focus your reasoning on the point(s) that you think are clearest and most important. AO3b Evaluation Weigh up your analysis, e.g. reason how likely or significant your arguments are, consider both sides, or compare alternatives. Make an overall judgement that makes a final decision and answers the exact question set. This should be fully supported. It should link back to your analysis/evaluation and be clear why one argument takes priority. We hope you enjoy your study of economics on this course and that this book will help you to achieve a good grade. Chris Bancroft, Clive Riches and Jan Miles-Kingston ix This page intentionally left blank 351950_01_OCR_GCSE_Econ_001-018.indd Page 1 01/04/22 3:01 PM user Part 1 Introduction to economics /146/HO02495/work/indd 351950_01_OCR_GCSE_Econ_001-018.indd Page 2 01/04/22 3:02 PM user /146/HO02495/work/indd Topic 1.1 Main economic groups and factors of production Key terms Consumer A person or organisation that directly uses a good or service. Producer A person, company or country that makes, grows or supplies goods and/or services. Government A political authority that decides how a country is run and manages its operation. Good A tangible product, i.e. a product that can be seen or touched. Service An intangible product, i.e. a product that cannot be seen or touched. Learning outcomes After studying this topic, you should be able to: explain the role of the main economic groups: consumers, producers and the government, including their interdependence explain the factors of production: land, labour, capital and enterprise, including how they might be combined What is the role of the main economic groups? There are three main economic groups: consumers, producers and government. They all have different objectives and influence the economy by buying, selling or intervening in the buying and selling of different goods and services. These economic groups are sometimes referred to as ‘economic agents’ or ‘actors’. Goods and services will be referred to throughout this book, as the economic groups make decisions about these types of products. A ‘good’ is a product that can be seen and touched (i.e. is tangible), such as a mobile phone. A service is a product that cannot be seen or touched (i.e. is intangible), such as financial advice. Consumers In economics, a consumer is the individual who buys goods or services. A consumer is an end-user of a good. For instance, when an individual decides to buy and eat a chocolate bar from a shop, they are acting as a consumer. In this specification, the customer and the consumer are assumed to be one and the same. Consumers make choices about their spending, deciding whether it is worthwhile to buy a good. The main motivation in consumers’ decision making is their own self-interest. To make this decision, consumers weigh up the benefits or the satisfaction gained from using a good against the price they would have to pay to obtain it. Consumers purchase both goods and services on the high street 2 351950_01_OCR_GCSE_Econ_001-018.indd Page 3 01/04/22 3:02 PM user /146/HO02495/work/indd 1.1 Main economic groups and factors of production Consumers often act on an individual basis, so they may have less power in a market. If this is the case, they may need protection from the actions of more powerful producers who dominate a market. These producers may control the price, quantity or quality of a good. As a result, the government may intervene with regulations to protect consumers. For example, there have been regulations that try to make producers act more fairly when trying to sell goods to consumers. This includes giving fuller information about goods or special offers on goods. This should help consumers to fully consider a good's value and make more informed decisions about whether to buy. Case study What's in my sandwich? There are often cases of mislabelling of food in the news. For instance, companies have been criticised for not listing all ingredients in pre-packed, freshly made food that is sold direct to customers. This includes foods such as sandwiches that may contain allergens such as sesame seeds. The government has now intervened to require companies to include fuller information to protect those consumers who might have chosen the sandwiches because they appeared to be allergen-free. Without this intervention, the consumers would not have had full information about the product and might have decided to buy sandwiches that could have harmed them. Follow-up questions 1 Write down an item of food you have bought 2 List the reasons why you bought this item of food. Do any of the reasons rely on information from the producer (e.g. number of calories, ingredients and vitamin levels)? 3 Discuss, as a class, problems that might arise if you obtain incorrect information from a producer about an item of food. Write down some of these problems. 4 Consider how the government might act to help with these problems. Again, discuss this as a class and make a note of some of the examples. For more examples of the problems consumers face regarding food labelling, visit www.food.gov.uk/ news-updates/news. recently, such as a smoothie or a chocolate bar (note, you are the consumer of these goods). Producers Producers supply goods and services. For example, a farmer is a producer who grows crops and then supplies them to consumers or other producers. Producers make choices about what and how they produce. They have influence over the quantity, price and quality of a good they produce. Economists assume their main motivation is selfinterest, i.e. maximising their financial reward (profit). Government A government is a group of people that has the power to run a country. They make and enforce rules within that country. Some of these rules particularly affect consumers, such as the age when you are legally allowed to buy some goods (e.g. fireworks). Some of these rules affect producers, such as health and safety laws. For example, if a floor in an office is wet after cleaning, a warning sign should be placed in the area, or the area should be closed off to reduce the risk of injury. Activity In small groups, make a list of similar words for: 1 Consumers 2 Producers Compare your lists as a class. Activity 1 In groups, list government rules that apply to you (e.g. things you are not old enough to buy or that force you to do something). 2 Compare your lists and consider what further action the government might take if people do not follow the rules. 3 351950_01_OCR_GCSE_Econ_001-018.indd Page 4 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics The government spends money in an economy. For instance, it pays for hospitals provided by the National Health Service, for roads to be built and for the police service. It also gives money to individuals. For instance, child benefit is paid to families and universal credit is paid to those on a low income or without a job. The state pension is paid weekly to older individuals who are beyond a certain age and are likely to have retired from work. As an economic agent, the government acts both as a producer and as a buyer. Governments also affect the economy with many of their policies. For instance, they have the power to tax people and firms, which raises revenue that they can then use to cover their spending. For instance, corporation tax is a tax on a producer’s profits. The decision to increase or decrease these taxes can affect the choices that consumers and producers make. Any of these government actions may influence price, quantity or quality of a good or service. Now test yourself 1 Identify which of the following are true and which are false: a Consumers are influenced by their potential satisfaction when deciding to buy a good. b A house is an example of a good. c Producers are mainly motivated by producing goods that are best for society. d A bank is an example of a producer. e Government information on the problems of smoking affects only consumers. How are the main economic groups interdependent? Key term Production The total output of goods and services produced by a firm or industry in a time period. 4 In economics, the decisions that each individual consumer, producer or government takes all contribute to the final choices made about how to use an economy’s resources (see Figure 1.1.1). Each economic group responds to the actions of the others, i.e. they are interdependent. For instance, the government may give a sum of money to farmers for milk production in the hope that it will result in citizens’ increased milk consumption. This extra income makes it more worthwhile for farmers to produce milk, so they respond by increasing production. With the extra money, farmers may be able to accept a lower price for milk. In response to a lower price, consumers are likely to buy more milk. Therefore, the government achieves its aim of an increase in milk consumption through the interaction between the three economic groups. 351950_01_OCR_GCSE_Econ_001-018.indd Page 5 01/04/22 3:02 PM user /146/HO02495/work/indd 1.1 Main economic groups and factors of production Government e.g. Government gives money to some producers to encourage them to produce more at a lower price e.g. Consumers pay taxes to government e.g. Government sets rules linked to consumption, such as age allowed to drive Consumers e.g. Producers provide jobs, which reduces unemployment benefits from government e.g. Producers sell to consumers Producers e.g. Consumers buy from producers Figure 1.1.1 Actions of interdependent economic groups impact the others Activity The problems associated with sugar content in drinks and what the government might do to reduce this have appeared frequently in recent news. Research sugary drinks online – try using some of the articles on www.bbc.co.uk. Consider the following questions: 1 What possible actions might the government take to reduce sugar content in drinks? 2 What impacts do you think this will have on consumers? What might they do as a result? There are problems linked to sugar content in drinks 3 What impacts do you think this will have on producers? What might they do as a result? What are the factors of production? Factors of production are the resources in an economy that can be used in the production process. They may also be referred to as resources or inputs. They are the means by which producers supply goods and services to meet the requirements of consumers. The four factors of production are explained below. Key term Factors of production The resources in an economy that can be used to make goods and services, e.g. land, labour, capital and enterprise. 5 351950_01_OCR_GCSE_Econ_001-018.indd Page 6 15/04/22 10:55 AM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Land Key terms Land The factor of production that is concerned with the natural resources of an economy, such as farmland and mineral deposits. Labour The factor of production that is concerned with the workforce of an economy in terms of both the physical and mental effort involved in production. A government makes school attendance compulsory In economics, land refers to the natural resources in an economy. These are all raw materials that are naturally occurring, such as oil, coal, trees, the sea and the ground itself. Labour Labour refers to the human resources that are available. This resource depends on the size of the population, the impact of migration (people coming in and out of the country) and the working age within a country. It is also affected by the quality of the labour, so the extent of education and training as well as the health of the population both have an impact (see Figures 1.1.2 and 1.1.3). An increase in the quantity or the quality of the labour force may affect the strength of a country’s economy. Over time, more workers can read and write This enables them to read and write job instructions So the workers become more skilled So output in an economy increases Figure 1.1.2 Chain of reasoning: the impact of education on the quality of labour There is an improvement in healthcare Over time, workers should have better health This means they need fewer days off work for illness This means there are fewer drops in production So output for firms can increase Figure 1.1.3 Chain of reasoning: the impact of healthcare on the quality of labour Capital Key term Capital The factor of production that relates to the human-made aids to production. Capital refers to human-made aids to production. It includes artificial resources that are inputs used to produce more goods and services. Examples include machinery, tools, factory buildings, transport such as freight lorries, and items of technology used during the production process. Capital that is human-made and used to support and enable the operation of the production process is called infrastructure. Good examples of infrastructure are broadband, roads and the electricity network. Study tip Activity Always try to apply factors of production if a specific good is mentioned in the wording of a question. For instance, if a question asks about factors of production in the fast-food industry, ‘a cook in a fast-food restaurant’ may be a better answer than simply ‘workers’. 1 How does this lorry support and enable the production process? 2 What infrastructure is needed to enable the use of this lorry? A transport example of capital 6 351950_01_OCR_GCSE_Econ_001-018.indd Page 7 01/04/22 3:02 PM user /146/HO02495/work/indd 1.1 Main economic groups and factors of production Enterprise Enterprise is when the other factors of production are organised to make goods and services. An entrepreneur is the person who puts enterprise into practice, i.e. the person who is willing to take forward the business idea and organise all the other factors of production to create the final goods and services. The entrepreneur also either bears the financial risk of the project or is held responsible for it by those who have funded the project. Well-known examples of entrepreneurs are Bill Gates (Microsoft) and Deborah Meaden (businesswoman and Dragons’ Den star). However, the concept equally includes any local business owners. Key term Enterprise The factor of production that takes a risk in organising the other three factors of production. The individual who takes this risk is known as an entrepreneur. Activity 1 Research Dragon’s Den entrepreneurs. To find out more, try using the search function and ‘Dragon’s Den’ on www.bbc.co.uk. 2 Look for examples of the risks involved and motivation for the entrepreneurs. Entrepreneur Deborah Meaden Case study Factors of production: chocolate biscuits Sales of chocolate biscuits in the UK have grown. UK producers have found that their core ranges have been particularly popular recently. Market researchers have estimated that only 8% of chocolate brands make up 90% of biscuit sales in supermarkets. This focus on favourite types of chocolate biscuits means that many producers have stopped making less popular biscuits and reorganised to make more of the favourite brands. This means their factors of production (production-line machinery, raw ingredients and factory workers) have changed. These changes impact other producers, such as farmers and transport companies, who now have to respond to the changes in the requirements of the chocolate biscuit producers. As the chocolate biscuit producers look for future sales growth, they are looking for ideas that will appeal to young consumers. Producers are looking for new innovative ranges that will become favourites. The development of sustainable packaging and healthier snacks may hold the key to this future success. Follow-up questions 1 List examples of the factors of production throughout the production of a chocolate biscuit. Think about the entire ‘life’ of a chocolate biscuit: the resources used from the moment someone has the idea for the chocolate biscuit to when the consumer buys it. 2 Now, categorise your examples by matching them to one of the four factors of production. 3 Which examples do you think would be the most common answer that young consumers would give? This can help you think of answers that are clear and straightforward. 7 351950_01_OCR_GCSE_Econ_001-018.indd Page 8 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Study tip There are many terms to learn in economics. Try techniques to help memorise these terms. For instance, rearrange the starting letters of each of the four factors of production (capital, enterprise, land, labour) to make the word CELL. Study tip It is worth preparing a list with simple examples of each factor of production that could be used in the production process of most goods. This makes it easier to think of examples in the examination. Now test yourself 2 Which type of factor of production are the following? a Soil d Restaurant owner b Fruit picker e Roads c Petrol How might the factors of production be combined? The way that the factors of production are combined to produce goods and services is a key part of how resources are allocated in an economy (see Figure 1.1.4). The world has only a limited amount of resources, and the growing world population creates increasing difficulties for the future. Therefore, decisions made about the combination of factors of production can help reduce this problem. For instance, car producers decide how much of their production should be completed by machines on the production line (capital) and how much workers should produce by ‘hand’ (labour). This results in certain quantities of these two factors of production being used. It may also have an impact on the amount of natural resources (land) utilised. For instance, production-line machines may be more efficient and waste fewer resources than individual workers. Advances in technology play a part in how factors of production are combined. For instance, Amazon Go supermarkets have a different mix of factors of production to traditional ones. Consumers scan their mobile phones as they enter the store, put items into their own bags and can then walk straight out. An electronic receipt is automatically sent to the consumer. This means Amazon has vastly reduced its need for labour as fewer workers are needed. It has also changed the capital used from tills and baskets to weight-sensors on shelves and cameras. ENTERPRISE An entrepreneur bears the risk and takes forward a business idea LAND, LABOUR, CAPITAL The entrepreneur decides on the quantities of the different factors of production to combine and organises them during production Goods and services produced Figure 1.1.4 Factors of production and the production process 8 351950_01_OCR_GCSE_Econ_001-018.indd Page 9 01/04/22 3:02 PM user /146/HO02495/work/indd 1.1 Main economic groups and factors of production Case study Changes in clothes retail Many high street shops in the UK sell clothes. These clothing retailers often have significant costs to rent premises in good locations and to pay sales assistants. They buy other items as well, including fittings for their shops such as clothes rails and mirrors, tills and credit card machines, signs and display materials. In recent years, there has been increasing use of the internet to buy clothes. The businesses selling through the internet may have costs that are different from high street shops, such as rent for an out-of-town warehouse, wages for drivers and warehouse assistants, and packaging, such as cardboard boxes. They are likely to have many more customers, as customers from all over the world can see the products they sell on the internet and can order them for direct delivery. The combination of higher sales and lower costs per item can give online clothes shops an advantage. During the Covid-19 pandemic, at times most clothes shops were not allowed to open. The government tried to help businesses. For example, it helped pay for staff who were told to stay at home and gave money to help pay some business costs while shops were closed. However, the future for high street clothes shops is uncertain. Many shops have shut down and it is hard to know whether customers will return to the high street at previous levels or will continue to buy online instead. Follow-up questions 1 Think of examples of the four factors of production linked to clothes retail. 2 Think of differences between the factors of production used for clothes sold online and on the high street. 3 How might the decisions of businesses running high street clothing shops affect consumers and the government? Activity In small groups or individually, consider your school. 1 Who are the consumers of your school? 2 List as many different producers as possible that provide goods and services to your school. 3 List and categorise as many factors of production as possible that are used in the production of your school. 4 What is the government’s role in your school? A range of economic groups and resources are involved in schools Extension material Interview a local entrepreneur. Your questions could include: 1 What goods and services do they sell? Why did they choose these in particular? 2 Who are their consumers and how do they get the consumers to buy their goods and services? 3 Does the government do anything that has a specific impact on their business? 4 What resources do they use to produce their goods and services? What proportions of people and machines do they use in production and why? 9 351950_01_OCR_GCSE_Econ_001-018.indd Page 10 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Progress check Now you have finished this topic, you should be able to: explain the role of consumers explain the role of producers explain the role of the government explain how consumers, producers and the government are all interdependent explain land as a factor of production explain labour as a factor of production explain capital as a factor of production explain enterprise as a factor of production explain how land, labour, capital and enterprise might be combined 10 351950_01_OCR_GCSE_Econ_001-018.indd Page 11 01/04/22 3:02 PM user /146/HO02495/work/indd Topic 1.2 The basic economic problem Learning outcomes After studying this topic, you should be able to: explain what is meant by scarce resources and unlimited wants explain the economic problem, including the questions of how resources should be allocated, what, for whom and how goods and services should be produced explain what is meant by opportunity cost evaluate the costs and benefits of economic choices, including the impact on economic, social and environmental sustainability What are scarce resources and unlimited wants? Key terms Scarce resources When there is an insufficient amount of something to satisfy all wants. Unlimited wants The infinite desire for goods or services consumers would like to have. Scarce resources are where there are fewer things to make goods and services than are desired. Other useful words to describe the scarcity of resources include ‘limited’, ‘finite’ and ‘insufficient’. Unlimited wants (also known as ‘infinite wants’) mean the desire for anything a consumer would like, whether or not they have the resources to purchase it. Another way to describe the problem of unlimited wants is that there are too many different uses for the resources. Once a resource is used for one purpose, it is often used up and cannot be used for anything else. Examples of scarce resources and unlimited wants for those resources are: the limited resource of oil and unlimited competing uses for it, such as petrol or central heating the finite resource of land and alternative uses for it, such as for growing wheat or building housing the scarce resource of doctors and the unlimited wants for their services by consumers, for example in different competing areas such as GPs or surgery insufficient housing and unlimited wants of a growing population Unlimited wants do not take into account the ability to actually buy something. For instance, if it does not matter whether consumers can afford to buy different goods and services; they are likely to always want more of the good. In other words, if consumers did not have to consider how much money they had, they might want a limitless number of clothes so that they had a specific outfit for every occasion. 11 351950_01_OCR_GCSE_Econ_001-018.indd Page 12 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Activity 1 In small groups, think of a resource, such as wheat. a Why might this resource be described as ‘scarce’? b How many uses of this resource can you think of? 2 As a class, exchange your ideas to give you a better understanding of these concepts. 3 How might society decide to allocate these scarce resources between these alternative uses? The distinction between ‘wants’ and ‘needs’ Wants are unlimited and include anything a consumer would like, whether or not they have the resources to purchase it, such as the latest electronic gadget. Needs are limited only to what is needed to survive, such as water. Note that although the world’s scarce resources could never fulfil the infinite wants of consumers, it might be possible to satisfy consumers’ needs. There may be enough resources to provide clean air, food, water, clothing and shelter for everyone. For instance, the National Health Service (NHS) has been at risk of being overwhelmed by wants and needs for its services. Even with the expansion of some of its resources, such as hospital beds, it has had to make difficult choices in the way patients are prioritised. This has, in turn, created a backlog of patients needing treatment. A growing population with unlimited wants has put a strain on healthcare Now test yourself 1 Decide whether each of the following products is better described as a want or a need. a Energy for heating d A loaf of bread b Hair gel e Drinking water c Jewellery f An online game What is the economic problem and how should resources be allocated? Put simply, the economic problem is that people want more than can be made from the available resources in the world. There is a gap between the limited amount of resources and the unlimited wants for them. The choice between different uses of resources is called allocation of resources. Choices and decisions have to be made to try to meet consumers’ wants. 12 Key term Economic problem How to best use scarce resources to satisfy the unlimited wants of people. 351950_01_OCR_GCSE_Econ_001-018.indd Page 13 01/04/22 3:02 PM user /146/HO02495/work/indd 1.2 The basic economic problem Three key economic questions are considered when trying to make the best use of limited resources: 1 What should be produced (e.g. should resources be used to make consumer goods, machinery, defence weapons or hospitals)? 2 How should it be produced (e.g. should firms use the latest technology or skilled craftspeople, operate using small-scale or large-scale production, and use incentives to motivate labour, managers and entrepreneurs)? 3 Whom should it be produced for (e.g. should goods and services be allocated to those with most money or those with special needs)? These are the three key parts to the economic problem. There are many different ways of solving the economic problem, some of which are discussed throughout this book. What is meant by opportunity cost? Key term Opportunity cost The next best alternative given up when making a choice. Activity Consider all the options available to you after you complete your GCSEs (A-levels, apprenticeships etc.). Choose your top two options and list the benefits of both. Based on these benefits, which would you say is your first choice? The other option and all its benefits that you have given up would be your opportunity cost. Key term Economic choice An option for the use of selected scarce resources. When deciding how to allocate scarce resources, the decision can be made based on opportunity cost. Opportunity cost is something that is given up when making a decision about the use of scarce resources. For instance, a person with a limited income has to decide what to buy, and the opportunity cost is what to sacrifice or go without. In making choices, the individual has to consider exactly what they are giving up (beyond just the thing itself). Is it the enjoyment, benefits and uses that are sacrificed? Here are some examples of opportunity cost. If you have the limited resource of 50p to spend on either an apple or a banana, and you choose the banana, the opportunity cost is the apple. The apple is the good that you have given up. If a family, with its limited income, has to choose between buying a car or having a new bathroom fitted and it chooses the car, the opportunity cost is the new bathroom. If a firm that produces cars and motorbikes decides to make more motorbikes, the opportunity cost is the cars that are sacrificed. The firm has fixed resources available to it at any point in time and has moved some of these from making cars to making motorbikes. It has therefore reduced the number of cars it can make. If a government increases spending on education, it might need to make savings elsewhere, such as reducing spending on public transport. The public transport that is sacrificed (with its benefits) is the opportunity cost. Evaluating the costs and benefits of economic choices Costs and benefits of economic choices are weighed against each other in order for an individual producer, consumer or the government to make the best decisions about how to allocate scarce resources. To evaluate the costs and benefits, economists consider the impact on the three key areas of economic, social and environmental sustainability. 13 351950_01_OCR_GCSE_Econ_001-018.indd Page 14 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Economic sustainability Key term Economic sustainability The best use of resources in order to create growth or development for a country, firm or individual, both now and into the future. Government builds new railway The economic sustainability of an economic choice ensures the best and most responsible use of scarce resources so that a firm or economy can keep on growing over time. It considers the impact on a range of economic factors, now and into the future (see Figure 1.2.1). These factors may include the associated economic costs of a decision, such as the costs involved in production or the price that a consumer pays. They may also include the impact on unemployment (see Topic 3.2) and government spending or tax revenue (see Topic 3.5). Jobs in construction and businesses along route Reduces unemployment Reduces unemployment benefits Reduces economic costs for government over time Figure 1.2.1 Chain of reasoning example: an economic choice and its impact on economic sustainability Activity Research online the costs and benefits of Crossrail. In particular, look for mention of economic, social and environmental impacts. Make notes on three costs and three benefits that seem to have different types of impact. Good starting points for research are www.bbc. co.uk, www.theguardian.com and www.crossrail.co.uk. Social sustainability Key term Social sustainability The impact of development or growth that promotes an improvement in quality of life for all, now and into the future. Government builds new railway Social sustainability considers how an economic choice affects a community’s quality of life and wellbeing. It requires that growth or development meet the basic needs of all, now and into the future, and encourages fairness and a better society with respect for others. Social impact may also cover who within society benefits and who within society pays. For instance, the economic choice to build a new fast passenger railway between London and Birmingham is likely to benefit most city commuters who live along that route but may be paid for in part from income tax revenue generated by citizens from all over the UK. For instance, when an economic choice is made to build a new railway, it may have both positive (see Figure 1.2.2) and negative impacts on a community. New stations make it easier for consumers to use rail Reduces car use so less congestion Quality of life improves for remaining road users Positive social impact over time Figure 1.2.2 Chain of reasoning example: a positive impact of building a new railway on social sustainability Key term Environmental sustainability The impact of development or growth where the effect on the natural world is small and possible to manage, now and into the future. 14 Environmental sustainability The impact of economic choices on environmental sustainability is an increasingly important consideration. It focuses on the impact on renewable and non-renewable resources, pollution creation and climate change, and the availability of future resources (see Figure 1.2.3). 351950_01_OCR_GCSE_Econ_001-018.indd Page 15 01/04/22 3:02 PM user /146/HO02495/work/indd 1.2 The basic economic problem Production of flights Uses fuel that depletes the non-renewable resource of oil Reduces ability to supply flights in the future (fuelled by fuel from oil) Reduces future quality of life Not environmentally sustainable Figure 1.2.3 Chain of reasoning example: a negative impact of passenger flights on environment sustainability A current focus for research and discussion between countries is climate change: its causes and impact on the world. It is important for all countries and governments to consider the impact on the environment of all economic choices. For example, all coal-fired power stations in the UK are gradually being closed as they produce significant pollution. The government is also investing in low-pollution energy sources. Renewable and non-renewable resources The distinction between renewable and non-renewable resources can be relevant for environmental sustainability. Renewable resources can be replaced as long as they are not overused, as in the case of forests. If forests are managed responsibly, with new trees being planted to replace older trees that have been cut down, this resource can be replaced. Non-renewable resources cannot be replaced once they are used, as with coal. Coal took millions of years to form, so once it is used it cannot be replenished. There is much debate over whether these resources are being used up at too fast a rate. Activity Many new shopping centres have been built on the outer edges of towns and cities. Make a list of the costs and benefits of these projects. Try to include impacts on economic, social and environmental sustainability. See if you can explain any of these impacts using chains of reasoning. Now test yourself 2 Which of the following statements are true and which are false? a Solar power is a non-renewable resource. b Oil is a non-renewable resource. c Sand is a renewable resource. d Wind is a renewable resource. e Diamonds are a non-renewable resource. f Energy from burning wood can be a renewable resource. Activity 1 In small groups, discuss and research the benefits and costs of constructing a new high-speed railway, such as High Speed 2 (HS2, a new high-speed railway linking major cities in the UK). 2 Make a list of these benefits and costs, and divide them according to whether they impact the economy, society or the environment. 3 Take one of each and try to explain them using chains of reasoning. 4 Choose your best points and see if you can make an overall supported judgement on whether the benefit may outweigh the cost of constructing a new high-speed railway. 15 351950_01_OCR_GCSE_Econ_001-018.indd Page 16 01/04/22 3:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Evaluate this Evaluate whether the benefits outweigh the costs of constructing a new high-speed railway. Using the information in this topic and your own knowledge, evaluate whether the benefits outweigh the costs in this example. Faster for commuters to get to work Better substitute for private cars This is the first time you will have encountered the ‘Evaluate’ skill in the course, so here is an example of a chain of reasoning for analysis and possible matching evaluation. Commuters switch from cars to train Fewer cars on the roads Reduced journey times for other drivers Figure 1.2.4 Chain of reasoning example: a benefit of constructing a new high-speed railway However, building a new railway would take a long time More road traffic due to railway construction vehicles More road congestion during construction Longer journey times for all road users Figure 1.2.5 Chain of reasoning example: how a benefit may be outweighed by a cost of constructing a new high-speed railway Judgement: Overall, the benefits of reduced journey time should outweigh the costs of a new high-speed railway + Support: This is because, once the railway is built, not only will there be a switch from cars to rail but also from lorries to rail, helping to further reduce congestion Figure 1.2.6 An example of a judgement with support for whether the benefit may outweigh the cost of constructing a new high-speed railway There is more advice on this technique on p. ix. Extension material 1 Find an article in the news about economic choices that have economic, social and environmental sustainability impacts. A good starting point is www.bbc.co.uk. 2 Research a current proposal being considered by your local council, such as building new roads, housing estates or council offices. A good source for ideas is your local newspaper. See what information you can find out about the project and its advantages and disadvantages. Identify these as having economic, social and environmental sustainability impacts. Based on your findings, evaluate the project and decide whether you think it should go ahead. 16 351950_01_OCR_GCSE_Econ_001-018.indd Page 17 01/04/22 3:02 PM user /146/HO02495/work/indd 1.2 The basic economic problem Case study Heathrow airport and the new third runway There are plans to expand Heathrow airport with a new third runway that will have better links to rail services across London. Heathrow is already a major hub airport and one of the world’s busiest, operating closer to capacity than other British airports. Building a new runway should reduce congestion in the existing London airports. This is because more planes will be able to land at the same time (which will therefore significantly increase the potential number of flights coming into London). However, it may also make Heathrow airport the biggest emitter of carbon dioxide in the country. A third runway at Heathrow has been opposed by some groups Furthermore, from a choice of different airport expansion plans, this option is predicted to create the most jobs and make the most money for the country. However, the expansion will be extremely costly to construct and operate. Follow-up questions The proposal received much opposition from local communities because, despite the benefits for international travel, many houses in the area would be affected, for example, by increased noise pollution. 2 Consider whether the benefits of building a third 1 Think of a cost and a benefit of a third runway at Heathrow for each of the categories of environmental, economic and social. How might you explain these costs and benefits? runway at Heathrow outweigh the costs. Progress check Now you have finished this topic, you should be able to: explain what is meant by scarce resources explain what is meant by unlimited wants explain the economic problem explain what is meant by ‘what goods and services should be produced’ explain what is meant by ‘for whom goods and services should be produced’ explain what is meant by ‘how goods and services should be produced’ explain what is meant by opportunity cost explain the impact of economic choices on economic sustainability explain the impact of economic choices on social sustainability explain the impact of economic choices on environmental sustainability evaluate the costs and benefits of economic choices 17 This page intentionally left blank 351950_02_OCR_GCSE_Econ_019-092.indd Page 19 01/04/22 3:17 PM user Part 2 The role of markets and money /146/HO02495/work/indd 351950_02_OCR_GCSE_Econ_019-092.indd Page 20 01/04/22 3:18 PM user /146/HO02495/work/indd Topic 2.1 The role of markets Learning outcomes After studying this topic you should be able to: explain what is meant by a market explain the features of the primary, secondary and tertiary sectors, including the difference between the production of products and services explain the difference between factor and product markets, including their interdependence evaluate the costs and benefits of specialisation and exchange in markets, including for producers, workers, regions and countries What is a market? Key term Market Any way of bringing together buyers and sellers to buy and sell goods and services. A market is a way of bringing together buyers and sellers to buy and sell goods and services. This market could be: a physical market with many stallholders (sellers) and buyers, as is found in towns and cities or in farmers’ markets a shop where the seller is the shop owner or the sales assistant, and the buyer is the customer an auction where the selling price is determined by how many buyers there are and what they are prepared to pay through the internet or over the telephone, or through catalogues sent by post A market is any way of bringing together buyers and sellers 20 351950_02_OCR_GCSE_Econ_019-092.indd Page 21 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets Activity Think of a product, such as cars or washing machines. How many sellers of this product are there in your town? (Remember, there are different ideas of what a market is.) Do they all sell the product at the same price? If not, can you think why this could be? Once you have completed the tasks, exchange your ideas with the rest of the class. (Note that we will be giving you the means of answering this question like an economist later on in this book, but at this stage, try to come up with some sensible ideas.) Markets exist in all types of economies. The concept of ‘a market’ is best seen in a market economy. This relies on the forces of supply and demand (see Topics 2.2, 2.3 and 2.4) to determine the allocation of scarce resources (see Topic 1.2). In reality, there are no pure market economies. Instead, most economies are mixed economies. In this type of economy, resources are allocated both by market forces and by the government. Key term Market economy An economy in which scarce resources are allocated by the market forces of supply and demand. What are the features of the primary, secondary and tertiary sectors? The production of goods in an economy takes place in three different sectors. The Forestry Commission, for example, cuts down trees and sends the wood (primary sector) to a furniture manufacturer. This manufacturer makes a wooden table (secondary sector) which goes to a furniture shop. It, in turn, sells the table to a customer (tertiary sector). This section will explain the features of the three sectors, including the difference between the production of goods and services. What is the primary sector? The primary sector refers to the direct use of natural resources. It is the extraction of basic materials and goods from the land and sea. It includes agriculture, fishing, forestry, mining, oil and gas extraction and quarrying. All these products are either consumed directly, for example fish, vegetables etc., or are the raw materials for the production of other goods. Slate quarrying, for example in Cumbria, provides materials for the roofs of buildings and for the making of household goods such as clocks and place mats. Key term Primary sector The direct use of natural resources, such as the extraction of basic materials and goods from land and sea. Activity Investigate what primary sector activities take place in your area of the country. Make a list and then link them to secondary sector activities in your area. Compare your list with others in the class. 21 351950_02_OCR_GCSE_Econ_019-092.indd Page 22 01/04/22 3:18 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics £m Activity 3,400 3,200 3,000 2,800 2,600 2012 2014 2016 2018 2020 Year Sources: www.tradingeconomics.com; ONS Figure 2.1.1 Value of UK agricultural output since 2012 1 Explain what has happened to agricultural output since 2012. (When asked to explain a chart such as this one, don’t repeat the information but explain the overall trend.) 2 In which year was the value of output: a highest b lowest? 3 In small groups, discuss what you think might happen to the value of agricultural output in the future. Remember, you must offer reasons for your views. Be prepared to report on your group’s ideas to the whole class. 4 If you have time, research using the Office for National Statistics (ONS) website what has happened to the value of output trends in other areas of the primary sector. What is the secondary sector? Key term Secondary sector All activities in an economy that are concerned with either manufacturing or construction. The secondary sector refers to all the activities in an economy that are concerned with either manufacturing or construction. Both of these involve taking the products of the primary sector either directly, i.e. when raw materials are converted into manufactured goods, or indirectly, i.e. when the raw materials have undergone some process already, and then producing a good. Manufacturing Manufacturing includes both: the direct use of raw materials from the primary sector, such as refining oil to make petrol, or making wooden furniture and cheese the indirect use of materials, such as making component products for a car, or mobile phone parts. It includes everything from handicrafts to high technology. Finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or cars. 22 351950_02_OCR_GCSE_Econ_019-092.indd Page 23 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets £m Activity 50,000 48,000 46,000 44,000 42,000 40,000 38,000 36,000 2012 2014 2016 2018 2020 Year Sources: www.tradingeconomics.com; ONS (www.ons.gov.uk) Figure 2.1.2 Value of UK manufacturing output since 2012 1 Download your own copy of this chart using the sources shown below the figure, but with up-to-date figures. 2 What are the differences between your chart and the one shown above? 3 In what ways does the trend in manufacturing differ from that for agriculture? Construction Construction is the process of constructing a building or infrastructure. This could be buildings such as houses, schools or offices, or infrastructure such as an airport runway or a road. £m Activity 32,000 30,000 Study tip Make sure you are clear on the differences between the three sectors. Remember that construction is part of the secondary sector (students often state that construction is part of the tertiary sector). 28,000 26,000 24,000 22,000 20,000 2012 2014 2016 2018 2020 Year Sources: www.tradingeconomics.com; ONS Figure 2.1.3 Value of UK construction output since 2012 1 How does the trend shown for construction compare with that for manufacturing? 2 Discuss as a class what factors could have caused the differences. 23 351950_02_OCR_GCSE_Econ_019-092.indd Page 24 15/04/22 11:10 AM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Activity Make a list of secondary sector activities in your area. Compare these with others in your class. Then use the primary sector list you produced earlier to link these activities with secondary sector activities in the area. 1 In pairs, investigate one of the secondary firms to find out if they use products from the local primary sector in their business. If they do, try to find out what percentage of their inputs this represents. 2 Combine your investigations with those of the other pairs to discover what percentage of the secondary firms rely on primary activity in your area. 3 What conclusions can you draw from this? Discuss these as a class. What is the tertiary sector? Key term Tertiary sector All activities in an economy that involve the idea of a service. The tertiary sector refers to all activities in the economy in which a service is provided. Services are provided not only to other firms, but also to individual consumers and the government. Services involve a wide range of different activities, including transport, retail entertainment, tourism and finance. Retail is a part of the tertiary sector and provides a direct service to consumers Activity 1 Make a list of as many different services as possible that you and your family consume. Compare your list with others in your group. 2 In pairs, discuss which sector restaurants should be classified in. Be prepared to explain this to the rest of the class. 24 351950_02_OCR_GCSE_Econ_019-092.indd Page 25 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets One way in which the tertiary sector differs from the secondary sector is that services are based on people dealing with other people directly, whereas the secondary sector is concerned with the production of actual goods. Cars, for example, can be physically touched (tangible), but car insurance cannot (intangible). In the past 100 years, most economies have seen a significant shift from the primary and secondary sectors to the tertiary sector. In the UK, the tertiary sector is both the largest sector in terms of employment and contribution to the size of the economy (gross domestic product or GDP, see Topic 3.1) and the fastest-growing sector. In 2019 the primary sector contributed about 4% of GDP, the secondary 17% and the tertiary 79%. £m In groups, discuss other possible differences between tertiary and secondary sectors. Present your findings to the class. Activity Activity Find out what the latest figures are for the three sectors in terms of employment and contribution to GDP. Construct a chart to show them. A good source of data is the ONS website: www.ons.gov.uk and www. ons.gov.uk/economy. 40,000 38,000 36,000 34,000 32,000 30,000 2012 Activity 2014 2016 2018 2020 Year Sources: www.tradingeconomics.com; ONS Figure 2.1.4 Value of UK service sector output since 2012 1 What has happened to the service sector’s output over the period shown? Study tip Try to use up-to-date figures and information in answers. 2 In groups, discuss why the trend you have identified has taken place. Then exchange your ideas with the rest of the class. 3 If you have time, research using the sources shown what has happened to the value of output in other areas of the tertiary sector. Now test yourself 1 Give three examples of different types of market. 2 In which sector of the economy should the following be placed? a House building c Restaurants b Deep-sea fishing d Vaccines What is the difference between product and factor markets? The product and factor markets are concerned with buyers and sellers of goods and services (product market) and the factors of production (factor market). (See Topic 1.1.) Key terms Product market Market in which final goods or services are offered to consumers, businesses and the public sector. Factor market Market in which the services of the factors of production are bought and sold. 25 351950_02_OCR_GCSE_Econ_019-092.indd Page 26 01/04/22 3:18 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics What is the factor market? A factor market is one in which the services of the factors of production, such as different skills of workers, but not the actual factors of production, are bought and sold. There are, therefore, markets for each factor of production: labour markets, the market for raw materials (land), the capital market, and the enterprise, or entrepreneurial, market. The firm then uses all of these to make goods or to provide services. The price for each factor is based on supply and demand, and is a derived demand (see Topic 2.7). The key points about the factor market are: It refers to the buying and selling of the services of factors of production. The demand for the factors is a derived demand. The price of factors is determined by the interaction of demand and supply. Households supply labour to firms in return for wages/salaries. What is the product market? A product market refers to markets in which final goods or services are offered to consumers, businesses and the public sector. It is concerned with finished goods and services, not the buying and selling of raw materials or products used in producing final goods and services (which are part of the factor market). Examples of product markets are food from supermarkets, spare car parts for a garage, and stationery supplies for an office. Effective product markets ensure that consumers benefit from lower prices and a wider choice of goods and services by increasing competition and encouraging the entry of new companies with new products or brands. They also encourage all firms to innovate and create new goods or services (see Topic 2.5). The key points about the product market are: It refers to the buying and selling of final goods and services. Households, other firms and the public sector are the buyers. The price of the product is determined by the interaction of demand and supply of a product (see Topic 2.6). Interdependence of factor and product markets Now test yourself 3 Households can be part of both the factor and product markets. How does this come about? 26 The interdependence of the two markets can be shown as follows. Households are involved in both markets. They supply labour to firms, which in turn pay them wages and salaries (the factor market). The households then consume the goods and services that are produced (the product market). Firms buy resources in return for making payments to the factors of production (see Topics 1.1 and 2.7). The interaction between product and factor markets involves the principle of derived demand. Derived demand means that a product or factor of production is not demanded for itself but is dependent on the demand for the product it helps to produce. If the demand for cars increases, the producer may demand more factors of production – for example, labour and parts from their suppliers – to meet the demand. 351950_02_OCR_GCSE_Econ_019-092.indd Page 27 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets The position of households, as described above, and the existence of derived demand show that the two markets are interdependent, i.e. they support each other. Activity Schools provide the service of education. 1 In pairs, or small groups, decide how the service of education in your school can be broken down into more specific services, such as teaching, administration and lab assistance. In addition, your school may provide other products, for example to outside organisations. Find out what these are. 2 Then make a list of all the factors of production that are required by your school. 3 Explain whether teachers are part of both the factor and product markets. Prepare a presentation to explain why this is/is not the case. Evaluating the costs and benefits of specialisation and exchange in markets Specialisation occurs when individuals, firms, regions and countries concentrate on producing those goods and services in which they have an advantage. It often means that they have to give up producing other goods and services. This involves the idea of opportunity cost (see Topic 1.2). By giving up these products, the individual or firm has to rely on exchange in order to obtain them. Exchange involves the giving up of something the individual or firm has, in return for something they need, but do not possess. Economic behaviour involves the exchange of one scarce resource for another. Originally, exchange was by bartering, but today we usually use money (see Topic 2.8). Specialisation should mean that the individual or producer focuses on what they are best at doing, resulting in an increase in output and greater efficiency. For example, if I am better at cooking, but my partner is better at decorating, then by specialising in what we are best at it is likely that the work gets done faster and to a higher standard. In addition, specialisation can apply to all the factors of production (see Topic 1.1). Key terms Specialisation The process by which individuals, firms, regions and whole economies concentrate on producing those products that they are best at producing. Exchange The giving up of something that the individual or firm has, in return for something they wish to have but do not possess. Case study Ford Engineering Group The Ford Engineering Group is a global specialist in the high-precision engineering and pressing of component parts for the aerospace, automotive and other high-technology industries. Only a few other companies in the world provide these services. Ford’s aerospace division provides parts for many of the world’s leading aerospace manufacturers. Follow-up questions 1 In which sector of the economy is the Ford Engineering Group? Explain your answer. 2 Explain the advantages that the Ford Engineering Group might gain from specialising in the production of component parts. 27 351950_02_OCR_GCSE_Econ_019-092.indd Page 28 01/04/22 3:18 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics What are the costs and benefits for producers? World output has increased through firms specialising in different types of products. Manufacturers, for example, concentrate on the end product and often buy in most, or all, of the components from other manufacturers. This enables them to gain more benefits such as large economies of scale (see Topic 2.6). In addition, producers must exchange the income they earn by selling their products for the components they need to enable them to produce. Table 2.1.1 shows the benefits and costs to producers of specialisation and exchange. Study tip In evaluation questions, try to use words such as ‘although’, ‘because’, ‘however’, ‘more important’ and ‘to a greater extent’ as evidence that evaluation is taking place. Evaluate this Using the information in this topic and your own knowledge, evaluate whether the benefits of specialisation for producers outweigh the costs. Check that you fully understand what is meant by evaluate before answering this question – see p. ix for advice on this technique. Table 2.1.1 Benefits and costs of specialisation and exchange for producers Benefits for producers Costs for producers Higher output: total production of goods and services is increased. In some areas it is possible to use automated systems or specialist equipment. As output increases, costs may eventually rise. This is because resources may become shorter in supply or it takes more people to organise the workforce, etc. Dependency: production of goods and services depends on Higher productivity: workers who specialise in one all parts working well. Problems such as a technical failure or task become as skilled as they possibly can in that area, which increases productivity (output per worker a strike can lead to the whole process stopping. per hour, see Topic 2.6). Higher quality: the best and most suitable factors of production can be employed to produce the output. Producers can buy the best components from specialists instead of having to make them. Failure of exchange: exchange can fail if it is not possible to buy the scarce resources or components needed to produce, or if the supplier greatly increases the price or restricts production. Bigger market: if all producers specialise, then for each product there should be more buyers for each producer. Movement of workers: workers may become bored and leave (known as labour turnover), so new workers have to be recruited and trained. This can particularly affect low-skilled and low-paid work. In the UK the employee turnover rate is about 12% per year, i.e. nearly one worker in eight changes jobs every 12 months. This change in workforce is highest in areas such as retailing, hotels, catering and leisure. Economies of scale: larger output will enable the producer to gain economies of scale (see Topic 2.6). Time saving: it takes time to stop producing one product and to start another, so specialisation saves time and money. 28 351950_02_OCR_GCSE_Econ_019-092.indd Page 29 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets Case study Tesla Tesla is an automotive and energy-storage company that designs, manufactures, and sells electric cars, electric vehicle power, train components and battery products. It is the world’s most valuable car company. In April 2021, Tesla recorded a profit of $438 million on revenues of $10.39 billion, despite facing supply issues and the latest in a series of safety investigations following a fatal crash in Texas when it is thought the car was on autopilot. Sales of its Model Y compact sport-utility vehicle and demand in China helped Tesla deliver roughly 184,800 vehicles in the first 3 months of the year, more than double the number during the same period a year earlier. In May 2021 it was reported that sales of electric vehicles in the UK were expected to be below the predicted level. Follow-up questions 1 Give two reasons why the sales of electric cars are increasing. 2 Give two reasons why sales of electric vehicles in the UK were lower than expected. Extension material Discuss what Tesla could do to overcome the disadvantages of specialising in the electric car market. What are the costs and benefits for workers? All workers today specialise unless they aim to be totally self-sufficient and make and produce everything they need. By specialising, a worker exchanges their labour for money. With this money they can then buy the products they need and want. Specialisation can take the form of an expert in a particular type of work, such as an economics teacher, an electrical engineer or a hospital consultant. It can also occur when a worker performs only one part of a production process, such as checking the weight of bags of dried fruit on the conveyor belt on a production line or working in the lighting department of a shop. Specialisation by individuals, as in the cases mentioned, is called the division of labour. Table 2.1.2 shows the benefits and costs to workers of specialisation and exchange. Study tip Evaluation must always take place in the context of the actual question asked and of any context material. Key term Division of labour Where workers specialise in, or concentrate on, one area of the production process. Table 2.1.2 Benefits and costs of specialisation and exchange for workers Benefits for workers Costs for workers Increased skill: by specialising, workers become more skilful in and knowledgeable about their work. This can result in them earning more money (see Topic 2.7). Boredom: doing the same job every day may become boring and lead to demotivation. Natural strengths: workers can do what they are best at and do not have to do work they are not so good at. This should again allow them to earn more. Deskilling: by specialising, workers lose the skills to do other types of work and are less able to respond to changes in demand. Increased job satisfaction: allowing workers to do what they are good at is likely to improve their motivation and satisfaction at work. Unemployment (see Topic 3.2): if there is a fall in demand for a particular product, workers may find it difficult to get another job because they do not have the necessary skills or experience. This may also occur because machines can replace their work. Increased standard of living (see Topic 3.1): by earning more money, workers can buy more goods to satisfy not only their needs, but also some of their wants. 29 351950_02_OCR_GCSE_Econ_019-092.indd Page 30 01/04/22 3:18 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Study tip Remember that you are likely to be asked to evaluate the costs and benefits of specialisation. You should spend time making sure that you fully understand the arguments and can come to a supported conclusion. A brief example could be: ‘Although there are costs to workers, such as deskilling leading to unemployment, the benefits are greater as there is an increase in job satisfaction since workers are doing what they are best at. This may lead to higher pay.’ Evaluate this Using the information in this topic and your own knowledge, evaluate whether the benefits of specialisation for workers outweigh the costs. Check that you fully understand what is meant by evaluate before answering this question – see p. ix for advice on this technique. Case study Barbour and the division of labour Each Barbour jacket starts its life at a cutting station, where rolls of waxed cotton are cut into a length which makes three jackets. An industrial cutter is used to carve through layers of waxed cotton, cutting out the various shapes that will eventually make up one of Barbour’s jackets. Each jacket involves about 36 individual processes, involving many different workers. Each jacket has to go through different sewing procedures including: applying the tartan lining to the inside of the jacket, sewing on pockets and placing the label on the inside collar. The jackets go round the factory on a pulley system that is constantly moving. The jackets then go through a range of finishing processes including: a worker marking where the buttons and eyelets are to go with a yellow crayon, adding the zip pulls and sewing on the hem. Finally, each jacket is subject to a quality control process. Follow-up questions 1 Using the case study material, explain what evidence there is for Barbour using a division of labour system. 2 Explain the disadvantages to the workers at Barbour of this division of labour. 3 Analyse an advantage to the producer of the process outlined in the case study. What are the costs and benefits for regions? As well as producers and workers, regions within a country can also specialise. They will specialise in whatever they are best at. Originally this was based on local natural resources. Most regions of the UK have at some time been known for a particular type of product, such as motorcars in the West Midlands and textiles in Lancashire and Yorkshire. Today, the Cambridge area specialises in high-technology businesses, while the Lake District specialises in tourism. This does not mean that a region only produces one product, but that it is particularly well known for its specialism, which makes an important contribution to the local economy. Some industries, such as food, have a range of regional specialities such as Lancashire hotpot or the Melton Mowbray pork pie. Table 2.1.3 gives the costs and benefits of specialising for regions. 30 351950_02_OCR_GCSE_Econ_019-092.indd Page 31 14/04/22 12:03 PM user /146/HO02495/work/indd 2.1 The role of markets The Lake District specialises in tourism Table 2.1.3 Benefits and costs of specialisation and exchange for regions Benefits for regions Costs for regions Efficient use of resources: a region could specialise in a particular industry due to availability of resources, so it will be easier to use that resource efficiently. Risk of fall in demand: if demand falls due to changes in taste and fashion (see Topic 2.2) then the industry will collapse or shrink, leading to resource wastage. Creates jobs for residents: the development of an industry in a particular region helps the residents of that area, since they can find work near to their homes. Resource exhaustion: if the raw materials are no longer available then those employed in the industry will become unemployed, e.g. coal mining in the northeast. Infrastructure development: a region that specialises in a particular industry will develop both infrastructure and supply industries (see external economies of scale, Topic 2.6) to support that industry. This will lead to further regional development. Loss of advantage: another region or country may become better at producing the good, leading to the problems of resource wastage and unemployment, e.g. shipbuilding has moved from areas such as Merseyside, Clydeside and Tyneside to South Korea. Activity 1 In pairs, find out what your region, or area, specialises in. Then find out what another region some distance away specialises in. Why do you think these specialisms are different? 2 As a class, discuss what each pair has discovered and decide on the factors that have led the different regions to specialise. What are the costs and benefits for countries? Activity Like regions, countries will specialise in producing what they have the greatest advantage in doing. Originally, this specialism was based on natural resources. This is still the case for some countries, such as cocoa beans from Ghana or oil from Saudi Arabia. In many cases, however, countries have moved to specialising in particular skills and knowledge. The UK is a major producer of financial services. As with regions, specialisation changes over the years as resources are exhausted or other countries develop greater advantages. In pairs, find out what the UK specialises in. (Hint: it is likely to export these products.) Find out how this has changed over the last 100 years. Why has it changed? Exchange your findings with the rest of the class. 31 351950_02_OCR_GCSE_Econ_019-092.indd Page 32 14/04/22 12:02 PM user /146/HO02495/work/indd OCR GCSE (9-1) Economics Specialising by countries leads to international trade, with exports of the specialist products and imports of those of other countries (see Topic 4.1). Table 2.1.4 gives the costs and benefits of specialisation and exchange for countries. Table 2.1.4 Benefits and costs of specialisation and exchange for countries Benefits for countries Costs for countries Economies of scale (see Topic 2.6) and efficiency: countries will specialise in what they do best, leading to greater efficiency and economies of scale. This increases the country’s output. Unemployment: specialisation not only creates jobs but also destroys them. As specialisation changes, workers in the declining industry may not be able to find new jobs, as they lack the necessary skills (see Topic 3.2). More jobs: the increased output may result in more investment and job creation. In some cases, especially in developed countries such as the UK, these jobs require skilled labour, leading to higher incomes. Over-dependence: countries can over-specialise and become dependent on one or a very small number of products. If world demand changes, these industries and the country’s economy may collapse. International trade: if a country specialises then it will no longer produce some goods that are wanted, but will have a surplus of its specialist products. This leads to international trade (see Topic 4.1) and a greater choice of goods and services for its people. Over-exploitation of resources: output may be increased by overexploiting resources, leading to unsustainable development (see Topic 4.4). Improved standard of living: increased choice, income, output and infrastructure mean a better standard of living for most people. Negative externalities: over-exploitation of resources and/ or production can lead to serious environmental damage (see Topics 3.8 and 4.4). Government revenue: increase in output, income and trade will lead to greater revenue from taxes for the government, which can again lead to improved living standards as more or better schools, hospitals etc. are provided. Now test yourself 4 For each of the following decide: Is it a benefit or a cost? Does it apply mainly to producers, workers, regions or countries? a The west coast of Cumbria is known as the energy coast. b There is a rise in the standard of living. c Livestock accounts for 50%+ of export revenue. d There is a high turnover of employees. e The size of the market increases. f 32 There is a wider range of goods and services. 351950_02_OCR_GCSE_Econ_019-092.indd Page 33 01/04/22 3:18 PM user /146/HO02495/work/indd 2.1 The role of markets Extension material 1 Using the data shown in Figures 2.1.1 to 2.1.4 above, compare the changes in output over the period from 2012. Which part of the economy has done best? Explain your answer. 2 Using the ONS website, update Figures 2.1.1 to 2.1.4 and see if there are any changes to the answer you gave above. why. This is an opportunity for you to compare your knowledge gained from this topic with ‘real life’. 4 The CIA World Factbook lists transport in the UK under the following headings: Airports, Heliports, Pipelines, Railways, Roadways, Waterways, Merchant Marine, and Ports and Terminals. 3 Contact a manufacturing firm in your area and try to arrange a visit to see how real-life production suppor

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