OCR GCSE Economics Unit 1 How the Market works

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1 OCR GCSE Economics Unit 1 How the Market works Revision Booklet Name of Student: Teacher: Michael Green

2 What happens when you revise the Ebbinghaus Forgetting Curve You should revise a complete unit of this booklet and then it the key information on the front page of each unit. Any information you cannot recall you should go over again from your notes. Beating the forgetting curve! Review information regularly once you ve learned the information you should it at the following times: 1. The same day hours later days after learning. 4. One week after learning. 5. Two weeks after learning. 6. One month after learning. Michael Green GCSE Economics 2

3 Unit 1: How the Market works 1. What is the economic problem? i. Defining the Economic Problem What you need to know: 1. Definition of wants and needs 2. Definition of Resources 3. Definition of the 4 factors of production (CELL) 4. Definition of Productivity 5. Definition of Scarcity 6. Definition of Opportunity Cost 7. Definition of Primary, secondary and tertiary sectors 8. Explain what an entrepreneur does 9. Explain what the basic economic problem is 10. Explain how resources are allocated in a free market economy 11. Explain why choices are made Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 3

4 i. Defining the Economic Problem 1. Definition of wants and needs 2. Definition of Resources 3. Definition of the 4 factors of production (CELL) 4. Definition of Productivity 5. Definition of Scarcity 6. Definition of Opportunity Cost 7. Definition of Primary, secondary and tertiary sectors 8. Explain what an entrepreneur does 9. Explain what the basic economic problem is Michael Green GCSE Economics 4

5 10. Explain how resources are allocated in a free market economy 11. Explain why choices are made Exam Questions: 1. With the aid of an example, explain what is meant by the: a. Primary sector? b. Secondary sector? c. Tertiary sector? [6] 2. State two factors of production for a fast food restaurant and explain why the cost of each might rise if competition is increased? [4] 3. From: CEO Topic: The options for improving customer experience in our fast food restaurant are: Option A: Sending staff on a one-day training course Option B: Re-decorating the restaurant i. Explain using the example above, the concept of opportunity cost. [2] ii. Explain how this decision demonstrates the basic economic problem. [2] 4. What is the role of an entrepreneur? [2] 5. Explain how resources are allocated in a free market economy. [2] 6. Explain with an example, why firms have to make choices. [2] Michael Green GCSE Economics 5

6 ii. 1. What is the economic problem? Approaches to the Economic Problem What you need to know: 1. Definition of Market 2. Definition of Market Economy 3. Definition of Planned Economy 4. Definition of Mixed Economy 5. Definition of Public Sector, with examples 6. Definition of Private sector, with examples Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 6

7 ii. Approaches to the Economic Problem 1. Definition of Market 2. Definition of Market Economy 3. Definition of Planned Economy 4. Definition of Mixed Economy 5. Definition of Public Sector Owner Motive 6. Definition of Private sector Owner Motive Michael Green GCSE Economics 7

8 iii. 1. What is the economic problem? Specialisation and the functions of money What you need to know: 1. Definition of Specialisation 2. Advantages and disadvantages of Specialisation for firms 3. Advantages and disadvantages of Specialisation for workers 4. The four functions of money Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 8

9 iii. Specialisation and the functions of money 1. Definition of Specialisation 2. Advantages and disadvantages of Specialisation for firms Advantages Disadvantages 3. Advantages and disadvantages of Specialisation for workers Advantages Disadvantages 4. The four functions of money Exam Question 8 marks Nottingham Theatre employs a range of workers, such as actors, make-up artists and cleaning staff. Do the benefits of specialisation outweigh the costs for Nottingham Theatre? Give reasons for your answer. Michael Green GCSE Economics 9

10 2. What are competitive markets? i. Competitive Markets What you need to know: 1. Definition of a Competitive Market 2. Ways in which firms can compete 3. Advantages and disadvantages of Competitive markets for consumers 4. Advantages and disadvantages of Competitive markets for consumers Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 10

11 i. Competitive Markets 1. Definition of a Competitive Market 2. Ways in which firms can compete 3. Advantages and disadvantages of Competitive markets for consumers Advantages Disadvantages 4. Advantages and disadvantages of Competitive markets for consumers Advantages Disadvantages Exam Questions 1. Discuss the impact on Perfect Pizzas of a new pizza restaurant opening in town. [8] 2. To what extent will the citizens of New Brunswick benefit from an increase in the number of supermarkets in town? [8] Michael Green GCSE Economics 11

12 2. What are competitive markets? ii. Monopoly and Monopoly Power What you need to know: 1. Definition of Monopoly 2. Definition of Monopoly power 3. Causes of monopoly power 4. Advantages of a monopoly for consumers 5. Disadvantages of a monopoly for consumers 5. Advantages of being a monopoly for the firm 6. Disadvantages of being a monopoly for the firm Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 12

13 ii. Monopoly and Monopoly Power 1. Definition of Monopoly 2. Definition of Monopoly power 3. Causes of Monopoly power 4. Advantages of a monopoly for consumers 5. Disadvantages of a monopoly for consumers 5. Advantages of being a monopoly for the firm 6. Disadvantages of being a monopoly for the firm Michael Green GCSE Economics 13

14 Exam Questions 1. Explain two ways in which a firm can achieve monopoly power. [4] 2. Assess the advantages and disadvantages to consumers of a firm having monopoly power. [8] 3. Discuss the extent to which monopoly power can benefit a big trainer firm such as Nike? [8] Michael Green GCSE Economics 14

15 iii. 2. What are competitive markets? Demand and Supply What you need to know: 1. Definition of Demand 2. Explain why demand curve slopes downwards 3. Identify factors that move demand curve (PASIFIC) 4. Definition of Supply 5. Explain why supply curve slopes upwards 6. Identify factors that move supply curve (PINTSWC) Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 15

16 iii. Demand and Supply 1. Definition of Demand 2. Explain why demand curve slopes downwards 3. Identify factors that move demand curve (PASIFIC) P A S I F I C 4. Definition of Supply 5. Explain why supply curve slopes upwards 6. Identify factors that move supply curve (PINTSWC) P I N T S W C Michael Green GCSE Economics 16

17 Exam Questions 1. Discuss factors which could cause the price of children s bikes to rise. [8] 2. Explain two factors which would cause the supply of cereals to fall. [4] 3. Discuss the factors which are likely to affect the demand for holiday accommodation in a tourist area such as Tunisia in Africa. [8] Michael Green GCSE Economics 17

18 2. What are competitive markets? iv. Price Elasticity of Demand and Price Elasticity of Supply What you need to know: 1. Definition of Price Elasticity of Demand (PED) 2. Formula for calculating PED 3. Types of PED, with numerical values and diagrams 4. Factors that influence PED 5. Definition of Price Elasticity of Supply (PES) 6. Formula for calculating PES 7. Types of PES, with numerical values 8. Factors that influence PES Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 18

19 iv. Price Elasticity of Demand 1. Definition of Price Elasticity of Demand (PED) 2. Formula for calculating PED 3. Types of PED, with numerical values and diagrams Type Numerical Value Diagram 4. Factors that influence PED Michael Green GCSE Economics 19

20 iv. Price Elasticity of Supply 5. Definition of Price Elasticity of Supply (PES) 6. Formula for calculating PES 7. Types of PES, with numerical values Type Numerical Value 8. Factors that influence PES Michael Green GCSE Economics 20

21 Exam Questions Fill the gaps using the words in the list: no quantity price small 1. Price elastic supply is when the increase in leads to a change in supply. 2. Draw a label a perfectly elastic supply curve on the diagram below. State what has happened to price and quantity as a result of the increase in demand. Michael Green GCSE Economics 21

22 2. What are competitive markets? v. Minimum and Maximum Price What you need to know: 1. Definition of Minimum price 2. Diagram showing minimum price 3. Definition of Maximum price 4. Diagram showing maximum price Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 22

23 v. Minimum and Maximum Price 1. Definition of Minimum price 2. Diagram showing minimum price 3. Definition of Maximum price 4. Diagram showing maximum price Exam Questions 1. Should the government put a minimum price on alcohol? Justify your answer. [8] Michael Green GCSE Economics 23

24 Unit 1: How the Market works 3. How do firms operate in competitive markets? i. Costs, revenues and profit What you need to know: 1. Definition of fixed costs, variable costs and total costs 2. Definition (and formula) of total revenue and average revenue 3. Definition of output 4. Definition (and formula) of profit Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 24

25 i. Costs, revenues and profit 1. Definition of fixed costs, variable costs and total costs Fixed Costs Variable Costs Total Costs 2. Definition (and formula) of total revenue and average revenue Total Revenue Average Revenue 3. Definition of output 4. Definition (and formula) of profit Exam Questions David Smith runs a company which rents out boats for fishing trips. Last weekend he hired out 3 boats. Total revenue 600 Total Cost Calculate the profit made by David renting out his boats. 2. Calculate his average revenue. Michael Green GCSE Economics 25

26 3. How do firms operate in competitive markets? ii. Production and Productivity What you need to know: 1. Definition of Production 2. Definition of Productivity 3. Ways productivity can be increased 4. Advantages of increasing productivity Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 26

27 ii. Production and Productivity 1. Definition of Production 2. Definition of Productivity 3. Ways productivity can be increased 4. Advantages of increasing productivity Exam Questions To what extent could an increase in productivity help a firm to compete more successfully? Give reasons for your answer. [8] Michael Green GCSE Economics 27

28 3. How do firms operate in competitive markets? iii. Growth of Firms What you need to know: 1. Definition of internal growth and external growth 2. Definition of merger and takeover 3. Definition of horizontal and vertical integration 4. The advantages and disadvantages of growth Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 28

29 iii. Growth of Firms 1. Definition of internal growth and external growth Internal growth External growth 2. Definition of merger and takeover Merger Takeover 3. Definition of horizontal and vertical integration Horizontal integration Vertical integration 4. The advantages and disadvantages of growth Advantages Disadvantages Exam Question Sharpe s ltd is a manufacturing company. It s owner, Tom Sharpe, is keen to grow the firm in the next 5 years. 1. Do you agree that the benefits of growth to Sharpe s ltd exceed the costs? Michael Green GCSE Economics 29

30 3. How do firms operate in competitive markets? iv. Economies and Diseconomies of Scale What you need to know: 1. Definition of (Internal) Economies of scale 2. Types of Internal Economies of Scale 3. Definition of External Economies of scale 4. Causes of Diseconomies of Scale Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 30

31 iv. Economies and Diseconomies of Scale 1. Definition of (Internal) Economies of scale 2. Types of Internal Economies of Scale Really Fun Mums Try Making Pies 3. Definition of External Economies of scale 4. Causes of Diseconomies of Scale C C C Exam Questions 1. State and explain two types of economies of scale that a supermarket could gain. [8] Michael Green GCSE Economics 31

32 3. How do firms operate in competitive markets? v. Rewards for Labour What you need to know: 1. Definition of wage and salary 2. Definition of gross and net income 3. Definition of nominal and real income 4. The Labour market diagram 5. Factors that cause shifts in supply of labour 6. Factors that cause shifts in demand for labour Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 32

33 v. Rewards for Labour 1. Definition of wage and salary 2. Definition of gross and net income 3. Definition of nominal and real income 4. The Labour market diagram 5. Factors that cause shifts in supply of labour 6. Factors that cause shifts in demand for labour Exam Question Should skilled workers be paid more than unskilled workers? Give reasons for your answer. [8] Michael Green GCSE Economics 33

34 3. How do firms operate in competitive markets? vi. The National Minimum wage What you need to know: 1. Definition of the national minimum wage (NMW) 2. Arguments for the NMW 3. Arguments against the NMW Beating the Ebbinghaus Forgetting Curve Unit completed (learned for first time) Same day 24 hour 3 day 1 week 2 week 1 month Completed: Time after first learnt: Michael Green GCSE Economics 34

35 vi. The National Minimum wage 1. Definition of the national minimum wage (NMW) 2. Arguments for the NMW 3. Arguments against the NMW Exam Questions 1. Using a diagram, explain the impact of an increase in the National Minimum Wage on unemployment. [6] 2. Do you think the National Minimum wage is a good idea? Give reasons for your answer. [8] Sally s café is a small business in South Wales. She employees two full time staff and four part-time staff to work on Saturdays. 3. Discuss the impact of the National Minimum Wage on the profits of a business like Sally s cafe. [8] Michael Green GCSE Economics 35