economics igcse

• Market Economic System: A system where consumers determine what is produced, resources are allocated by the price mechanism and land and capital are privately owned.
• Planned Economic System: A system where the government makes the crucial decisions, land and capital are state-owned and resources are allocated by directives.
• Directives: State instructions given to state-owned enterprises.
• Mixed Economic System: An economy in which both the private and public sectors play an important role.
• Market System: Refers to the method of allocating scarce resources through the market forces of demand and supply.
• Market Equilibrium: Exists when the demand for a product matches the supply, so there is excess demand (shortage) or excess supply (surplus).
• Price Mechanism: helps establish market equilibrium.
• Market Disequilibrium: Exists if the price for a product is too high (resulting in excess supply, or a surplus) or too low (resulting in excess demand, or a shortage).
• Price Mechanism: Refers to the system of relying the market forces of demand and supply to allocate resources.
• Features of Price Mechanism: No Government Interference: resources are privately owned and there is freedom to allocate scarce resources.
• Price Determines Allocation: high price encourages supply whereas low price drives demand
• Goods and services are sold to those who are willing and able to pay.
• Features of Price Mechanism: Incentives Determines Factor Allocation: high financial returns encourages production whereas low returns stop production.
• Competition Creates Choice and Opportunities: firms and private individual compete to produce quality and innovative goods and services.
• Demand: Refers to both the willingness and ability of customers to pay a given to buy a good or service.
• Supply: Is the ability and willingness of firms to provide goods and services at given price levels.