CCEA A Level Economics
CCEA A Level Economics AS 1 Key Economic Concepts and the Basic Economic Problem Exam Questions
Free CCEA A Level Economics revision for AS 1 Key Economic Concepts and the Basic Economic Problem: what you need to know, common mistakes and exam-style questions with answers. Covers factors of production, positive and normative statements, economic agents, scarcity, opportunity cost, production possibility frontiers, specialisation and economic systems.
Practise AS 1 Key Economic Concepts and the Basic Economic Problem with past papers
Once you have learnt this topic, find the AS 1 Key Economic Concepts and the Basic Economic Problem questions in real CCEA A Level Economics past papers and mark them with the mark scheme. Doing lots of real questions is the quickest way to learn how examiners ask about each idea.
About CCEA A Level Economics AS 1 Key Economic Concepts and the Basic Economic Problem
This is the starting point of Unit AS 1: Markets and Market Failure. You learn the language economists use: the factors of production, the difference between positive and normative statements, the objectives of consumers, firms and government, capital versus consumption goods, and product versus factor markets. The basic economic problem of scarcity and choice is then shown with opportunity cost and production possibility frontiers, before looking at specialisation and how different economic systems allocate resources. These ideas underpin every later topic. CCEA questions often ask you to draw and explain a PPF shift, classify statements, or explain opportunity cost using a short scenario.
What you need to know
- Factors of production Land (natural resources), labour (human effort), capital (man-made goods used to make other goods) and enterprise (organising the other factors and taking risk). Their rewards are rent, wages, interest and profit.
- Positive and normative Positive statements can be tested against evidence. Normative statements contain value judgements about what ought to happen, often using words like should.
- Economic agents Consumers aim to maximise utility, firms usually aim to maximise profit and governments aim to maximise social welfare. Capital goods are used to produce other goods; consumption goods satisfy wants directly.
- Scarcity and opportunity cost Wants are unlimited but resources are finite, so choices must be made. Opportunity cost is the value of the next best alternative forgone.
- Production possibility frontiers A PPF shows the maximum combinations of two goods that can be produced with existing resources and technology. Points inside show unemployed resources; an outward shift shows economic growth; the curve's shape reflects increasing opportunity cost.
- Specialisation and economic systems Specialisation and division of labour raise productivity but need exchange through money. Free market, command and mixed economies answer what, how and for whom to produce in different ways.
Common mistakes in AS 1 Key Economic Concepts and the Basic Economic Problem
- Defining opportunity cost as the money cost of a choice; it is the next best alternative given up.
- Labelling a statement as normative just because it contains numbers or opinions are mentioned; check whether it contains a value judgement.
- Drawing an inward PPF shift for a rise in unemployment; unemployment moves the economy to a point inside the curve.
- Treating money as a factor of production; financial capital is not the same as physical capital.
- Ignoring the disadvantages of specialisation, such as over-dependence and repetitive work, in evaluation answers.
Try three AS 1 Key Economic Concepts and the Basic Economic Problem exam-style questions
1. Distinguish between a positive and a normative statement, using an example of each. (4 marks)
Show the mark scheme answer
A positive statement is objective and can be tested with evidence; e.g. a rise in the minimum wage increased unemployment among young workers; a normative statement contains a value judgement; e.g. the government should raise the minimum wage.
2. Using a production possibility frontier, explain the effect of an increase in investment in capital goods. (4 marks)
Show the mark scheme answer
Correct PPF with capital goods and consumer goods on the axes; in the short run more capital goods means fewer consumer goods, a movement along the PPF, showing opportunity cost; over time capital stock rises; so the PPF shifts outwards, allowing more of both.
3. Explain two advantages of specialisation. (4 marks)
Show the mark scheme answer
Workers become more skilled at a narrow task so productivity and output per worker rise; time is saved as workers do not switch tasks; allows use of specialist capital; leading to lower average costs and more goods available to trade.
AS 1 Key Economic Concepts and the Basic Economic Problem FAQs
What does CCEA A Level Economics AS 1 Key Economic Concepts and the Basic Economic Problem cover?
Factors of production, positive and normative economics, the objectives of economic agents, capital and consumption goods, product and factor markets, scarcity, opportunity cost, PPFs, specialisation and economic systems.
Which unit is this topic examined in?
It is in Unit AS 1: Markets and Market Failure, a 1 hour 30 minute paper with short-answer questions, a case study and an extended response question.
What diagram must I learn for this topic?
The production possibility frontier. Practise showing opportunity cost, unemployment (a point inside), growth (an outward shift) and a change in technology affecting one good only (a pivot).
