OCR GCSE Economics Unit 1 How The Market Works

OCR GCSE EconomicsUnit 1 – How the Market worksRevision BookletName of Student:Teacher: Michael Green

What happens when you revise – the Ebbinghaus Forgetting CurveYou should revise a complete unit of this booklet and then review it the key information on the frontpage 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 review it at thefollowing times:1.2.3.4.5.6.The same day.24 hours later.3 days after learning.One week after learning.Two weeks after learning.One month after learning. Michael GreenGCSE Economics2

Unit 1: How the Market works1. What is the economic problem?i.Defining the Economic ProblemWhat you need to know:1. Definition of wants and needs2. Definition of Resources3. Definition of the 4 factors of production (CELL)4. Definition of Productivity5. Definition of Scarcity6. Definition of Opportunity Cost7. Definition of Primary, secondary and tertiary sectors8. Explain what an entrepreneur does9. Explain what the basic economic problem is10. Explain how resources are allocated in a free market economy11. Explain why choices are madeBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics3

i.Defining the Economic Problem1. Definition of wants and needs2. Definition of Resources3. Definition of the 4 factors of production (CELL)4. Definition of Productivity5. Definition of Scarcity6. Definition of Opportunity Cost7. Definition of Primary, secondary and tertiary sectors8. Explain what an entrepreneur does9. Explain what the basic economic problem is Michael GreenGCSE Economics4

10.Explain how resources are allocated in a free market economy11.Explain why choices are madeExam 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 ofeach might rise if competition is increased?[4]3.From: CEOTopic: The options for improving customer experience in our fast food restaurant are:Option A:Option B:Sending staff on a one-day training courseRe-decorating the restauranti.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 GreenGCSE Economics5

1. What is the economic problem?ii.Approaches to the Economic ProblemWhat you need to know:1.2.3.4.5.6.Definition of MarketDefinition of Market EconomyDefinition of Planned EconomyDefinition of Mixed EconomyDefinition of Public Sector, with examplesDefinition of Private sector, with examplesBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics6

ii.Approaches to the Economic Problem1. Definition of Market2. Definition of Market Economy3. Definition of Planned Economy4. Definition of Mixed Economy5. Definition of Public SectorOwnerMotive6. Definition of Private sectorOwner Michael GreenMotiveGCSE Economics7

1. What is the economic problem?iii.Specialisation and the functions of moneyWhat you need to know:1.2.3.4.Definition of SpecialisationAdvantages and disadvantages of Specialisation for firmsAdvantages and disadvantages of Specialisation for workersThe four functions of moneyBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics8

iii.Specialisation and the functions of money1. Definition of Specialisation2. Advantages and disadvantages of Specialisation for firmsAdvantagesDisadvantages3. Advantages and disadvantages of Specialisation for workersAdvantagesDisadvantages4. The four functions of money1.2.3.4.Exam Question – 8 marksNottingham Theatre employs a range of workers, such as actors, make-up artists andcleaning staff.Do the benefits of specialisation outweigh the costs for Nottingham Theatre? Give reasonsfor your answer. Michael GreenGCSE Economics9

2. What are competitive markets?i.Competitive MarketsWhat you need to know:1.2.3.4.Definition of a Competitive MarketWays in which firms can competeAdvantages and disadvantages of Competitive markets for consumersAdvantages and disadvantages of Competitive markets for consumersBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics10

i.Competitive Markets1. Definition of a Competitive Market2. Ways in which firms can compete3. Advantages and disadvantages of Competitive markets for consumersAdvantagesDisadvantages4. Advantages and disadvantages of Competitive markets for consumersAdvantagesDisadvantagesExam Questions1. 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 thenumber of supermarkets in town? [8] Michael GreenGCSE Economics11

2. What are competitive markets?ii.Monopoly and Monopoly PowerWhat you need to know:1.2.3.4.5.Definition of MonopolyDefinition of Monopoly powerCauses of monopoly powerAdvantages of a monopoly for consumersDisadvantages of a monopoly for consumers5. Advantages of being a monopoly for the firm6. Disadvantages of being a monopoly for the firmBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics12

ii.Monopoly and Monopoly Power1. Definition of Monopoly2. Definition of Monopoly power3. Causes of Monopoly power4. Advantages of a monopoly for consumers5. Disadvantages of a monopoly for consumers5. Advantages of being a monopoly for the firm6. Disadvantages of being a monopoly for the firm Michael GreenGCSE Economics13

Exam Questions1. Explain two ways in which a firm can achieve monopoly power. [4]2. Assess the advantages and disadvantages to consumers of a firm having monopolypower. [8]3. Discuss the extent to which monopoly power can benefit a big trainer firm such asNike? [8] Michael GreenGCSE Economics14

2. What are competitive markets?iii.Demand and SupplyWhat you need to know:1.2.3.4.5.6.Definition of DemandExplain why demand curve slopes downwardsIdentify factors that move demand curve (PASIFIC)Definition of SupplyExplain why supply curve slopes upwardsIdentify factors that move supply curve (PINTSWC)Beating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics15

iii. Demand and Supply1. Definition of Demand2. Explain why demand curve slopes downwards3. Identify factors that move demand curve (PASIFIC)PFAISCI4. Definition of Supply5. Explain why supply curve slopes upwards6. Identify factors that move supply curve (PINTSWC)PSIWNCT Michael GreenGCSE Economics16

Exam Questions1. 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 holidayaccommodation in a tourist area such as Tunisia in Africa. [8] Michael GreenGCSE Economics17

2. What are competitive markets?iv. Price Elasticity of Demand and Price Elasticity of SupplyWhat you need to know:1.2.3.4.Definition of Price Elasticity of Demand (PED)Formula for calculating PEDTypes of PED, with numerical values and diagramsFactors that influence PED5.6.7.8.Definition of Price Elasticity of Supply (PES)Formula for calculating PESTypes of PES, with numerical valuesFactors that influence PESBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics18

iv. Price Elasticity of Demand1. Definition of Price Elasticity of Demand (PED)2. Formula for calculating PED3. Types of PED, with numerical values and diagramsTypeNumerical ValueDiagram4. Factors that influence PED Michael GreenGCSE Economics19

iv. Price Elasticity of Supply5. Definition of Price Elasticity of Supply (PES)6. Formula for calculating PES7. Types of PES, with numerical valuesTypeNumerical Value8. Factors that influence PES Michael GreenGCSE Economics20

Exam QuestionsFill the gaps using the words in the list:noquantitypricesmall1. 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 GreenGCSE Economics21

2. What are competitive markets?v. Minimum and Maximum PriceWhat you need to know:1. Definition of Minimum price2. Diagram showing minimum price3. Definition of Maximum price4. Diagram showing maximum priceBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics22

v. Minimum and Maximum Price1. Definition of Minimum price2. Diagram showing minimum price3. Definition of Maximum price4. Diagram showing maximum priceExam Questions1. Should the government put a minimum price on alcohol? Justify your answer. [8] Michael GreenGCSE Economics23

Unit 1: How the Market works3. How do firms operate in competitive markets?i. Costs, revenues and profitWhat you need to know:1.2.3.4.Definition of fixed costs, variable costs and total costsDefinition (and formula) of total revenue and average revenueDefinition of outputDefinition (and formula) of profitBeating the Ebbinghaus Forgetting CurveUnitcompleted(learnedfor firsttime)Same dayreviewDateTime afterCompleted: firstlearnt: Michael Green24 hourreview3 dayreview1 weekreview2 weekreview1 monthreviewDateDateDateDateDatecompleted: completed: completed: completed: completed:GCSE Economics24

i. Costs, revenues and profit1. Definition of fixed costs, variable costs and total costsFixed CostsVariable CostsTotal Costs2. Definition (and formula) of total revenue and average revenueTotal RevenueAverage Revenue3. Definition of output4. Definition (and formula) of profitExam QuestionsDavid Smith runs a company which rents out boats for fishing trips. Last weekend he hiredout 3 boats.Total revenue 600Total Cost 2401. Calculate the profit made by David renting out his boats.2. Calculate his average revenue. Michael GreenGCSE Economics25