A-Level Economics - Core Concepts and Applications

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Opportunity Cost

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The value of the next best alternative foregone when making a decision. It represents the true cost of any choice, as resources are scarce and have competing uses. Example: A government spending on defence means less available for healthcare.

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Factors of Production

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The four economic resources used to produce goods and services: Land (natural resources), Labour (human effort), Capital (man-made aids to production), and Enterprise (risk-taking organisation). These are limited in supply, creating scarcity.

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Production Possibility Curve (PPC)

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A diagram showing the maximum possible combinations of two goods an economy can produce with given resources and technology. Points inside represent inefficiency; points outside are unattainable. Outward shifts indicate economic growth.

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Positive vs Normative Statements

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Positive statements are objective, testable claims about what 'is' (e.g., 'Unemployment is 5%'). Normative statements are subjective value judgments about what 'ought to be' (e.g., 'Unemployment is too high'). Economics primarily uses positive analysis.

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Market Equilibrium

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The point where demand equals supply, establishing a stable market price and quantity. At equilibrium, there is no tendency for change unless external factors shift the curves. The market clears naturally through price adjustments.