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Cambridge International AS and A Level Economics Student CD Mind maps As the ‘Preparing for examinations’ chapter suggests, mind maps are a good way of revising as you progress through your course. After you have covered a topic, try drawing a mind map linking the main features of the topic. It would also be useful to draw one linking that topic to other aspects of different topics. This section provides 20 mind maps, two for each chapter. You may use these as: ■ a reminder of the key featu
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  Cambridge International AS and A Level Economics Student CD Mind maps As the ‘Preparing or examinations’ chapter suggests, mind maps are a good way o revising as you progress through your course. Afer you have covered a topic, try drawing a mind map linking the main eatures o the topic. It would also be useul to draw one linking that topic to other aspects o different topics. Tis section provides 20 mind maps, two or each chapter. You may use these as: ■  a reminder of the key features of a topic ■  the basis to draw larger versions with additional links, which you may wish to place on a wall or include in your notes ■  an inspiration to draw up your own maps that bring out links, causes and consequences. Scarcity Tis is a key economic concept that explains why choices have to be made and why producing products involves an opportunity cost. It also links to the undamental questions aced by any economic system. Resources are󿬁niteWants arein󿬁niteWants exceed resourcesMeaningWhat toproduceHow toproduceWho to produce forEconomicgoodsLimitedsupplyScarceNot scarceUnlimitedsupplyFree goodsLeads to the threefundamental economicquestionsDifferent types ofProductsGives riseto choiceOpportunity costBest alternativeforgoneScarcity 1 Student CD Mind maps © Cambridge University Press 2015 Cambridge International AS and A Level Economics  Cambridge International AS and A Level Economics Different economic systems Economic systems have to make a number o choices. A planned economy and a market economy use different mechanisms to determine what is produced. A mixed economy uses a combination o the mechanisms employed by a planned economy and a market economy. What toproduceHow toproduceWay a country answersfundamental economicquestionsWho toproduce forEconomic systemMixed economyMarket forces and governmentdecisions determinewhat is producedUsePriceMechanismStatePlanningGovernment determineswhat is producedUse directivesPlanned economyMarket economyConsumersdeterminewhat is producedDifferent EconomicsystemsInform state owned 󿬁rmswhat to produceSignal preferences to 󿬁rmsusing the price mechanism Equilibrium Tis key economic concept can be applied in a micro or macro context and in both product and labour markets. Tis mind map concerns equilibrium in a product market, why it might be in disequilibrium and how it moves to equilibrium. No shortageor surplusOccurs wheredemand = supplyEquilibrium priceMarket EquilibriumDisequilibriumpriceOccur whereDemand ≠ supply Supply greaterthan demandDemand greaterthan supplyShortageSurplusShortageMove toequilibriumPrice risesPrice fallsDemandextendsSupplycontractsSupplyextendsDemandcontractsSurplusMove toequilibrium 2 Student CD Mind maps © Cambridge University Press 2015 Cambridge International AS and A Level Economics  Cambridge International AS and A Level Economics Producer surplus Producer surplus is a concept that is not always well understood. In this case you might want to add a link to how producer surplus would be in󿬂uenced by the elasticity o supply and/or use the mind map as the basis or drawing a separate one on consumer surplus. Producer surplusEquivalent toTotal revenue minustotal variable costsprice riseIncreaseproducersurplusReduceproducersurpluspricereduction Areabelow the price level andabove the supply curvePositive difference betweenthe price paid and what 󿬁rms were willing to acceptDe󿬁nitionEffect of aprice change Government influence on prices A government can in󿬂uence prices in a range o ways and or a range o reasons. Te direct ways include setting maximum and minimum prices on products and determining the price, which may be a zero price, o the products whose production it 󿬁nances. Te indirect ways are providing subsidies and imposing tariffs. Rent controlsMaximum priceof foodTo help poorconsumersMaximum priceGovernmentprice settingIndirect taxesMaybe produced free atthe point of consumptionTo encourageconsumptionTo help the poorDesigned toDiscourageconsumption ofdemerit goodsRaiserevenueSubsidiesTo ProducersTo encouragean increase in outputTo consumersTo encouragean increase inconsumptionMinimum priceTo help sellersMinimumwagesMinimum priceof agricultural productsGovernment In󿬂uenceon pricesSet prices for government 󿬁nanced products 3 Student CD Mind maps © Cambridge University Press 2015 Cambridge International AS and A Level Economics  Cambridge International AS and A Level Economics Government help to the poor A government may seek to help the poor in a number o ways. Tese include cash bene󿬁ts (transer payments), avourable tax treatment (tax ree allowance), bene󿬁ts in kind (direct provision o products) and the creation o  jobs (employment opportunities). PensionsE.G.Money given by the government not in return for the production of a productTransfer paymentsEmployment opportunitiesat low levels of incomeTax free allowances at low price levels Direct provision of jobsIndirect provision of jobsSubsidise privatesector 󿬁rms to takeon unskilled workersDirrect provision of productsProvided at low or zero pricesE.G. in some countriesEducation Health careGovernment helpto the poorUnemploymentbene󿬁tsIn state owned 󿬁rms Deflation Tis mind map brings out the distinction between good and bad de󿬂ation. You might want to draw a mind map bringing out the difference between cost-push and demand-pull in󿬂ation.  A sustained fall in the price levelCauses Decrease in aggregate demand  Advances in technologyReduction in costs of productionEncourage consumers to postpone purchasesEncourage consumption and exportsReduce output and employmentIncrease output and employmentGoodde󿬂ationGoodde󿬂ationBadde󿬂ationDe󿬁nitionBadde󿬂ationDe󿬂ationEffectsEffects 4 Student CD Mind maps © Cambridge University Press 2015 Cambridge International AS and A Level Economics
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