4381/4 Ansari Road, Daryaganj, Delhi 110002, India. Cambridge University Press is part of the University of Cambridge. It furthers the University’s mission by disseminating knowledge in the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781107612358 Š Cambridge University Press 2014 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2014 Printed in India by A catalogue record for this publication is available from the British Library ISBN 978-1-107-61235-8 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Information regarding prices, travel timetables, and other factual information given in this work is correct at the time of first printing but Cambridge University Press does not guarantee the accuracy of such information thereafter. NOTICE TO TEACHERS IN THE UK It is illegal to reproduce any part of this work in material form (including photocopying and electronic storage) except under the following circumstances: (i) where you are abiding by a licence granted to your school or institution by the Copyright Licensing Agency; (ii) where no such licence exists, or where you wish to exceed the terms of a licence, and you have gained the written permission of Cambridge University Press; (iii) where you are allowed to reproduce without permission under the provisions of Chapter 3 of the Copyright, Designs and Patents Act 1988, which covers, for example, the reproduction of short passages within certain types of educational anthology and reproduction for the purposes of setting examination questions. NOTICE TO TEACHERS The photocopy masters in this publication may be photocopied or distributed [electronically] free of charge for classroom use within the school or institution that purchased the publication. Worksheets and copies of them remain in the copyright of Cambridge University Press, and such copies may not be distributed or used in any way outside the purchasing institution. Every effort has been made to trace the owners of copyright material included in this book. The publishers would be grateful for any omissions brought to their notice for acknowledgement in future editions of the book.
CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 2
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 3
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 4
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CONTENTS
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 5
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 6
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 7
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 8
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INTRODUCTION
>RS] LYYU S] NO]SQXON ^Y SX^\YN_MO cY_ ^Y ^RO ]^_Nc YP OMYXYWSM] KXN ^Y ROVZ cY_
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cY_ aS^R KNNS^SYXKV ZY]]SLVO aKc] ^Y KZZ\YKMR ZK\^SM_VK\ ^YZSM] KXN ]^\OXQ^ROX ^RO
NOZ^R YP cY_\ KX]aO\] >RO]O K\O$ +VVYMK^S`O Z\YN_M^S`O KXN NcXKWSM OPร MSOXMc ZKQO] "!ยน"# -Y]^ LOXOร ^ KXKVc]S] ZKQO +QQ\OQK^O NOWKXN KXN KQQ\OQK^O ]_ZZVc KXKVc]S] ZKQO @OVYMS^c YP MS\M_VK^SYX ZKQO ! 0VObSLVO OWZVYcWOX^ ZKQO ! :_\MRK]SXQ ZYaO\ ZK\S^c ZKQO ## 6Y\OXd M_\`O ZKQO ! >RO MKZS^KV KXN ร XKXMSKV KMMY_X^] YP ^RO LKVKXMO YP ZKcWOX^] ZKQO] ยน +L]YV_^O KXN MYWZK\K^S`O KN`KX^KQO ZKQO] ! ยน !" >RO ^O\W] YP ^\KNO ZKQO !# >RO ,YYU S] NS`SNON SX^Y _XS^] /KMR YP ^RO]O _XS^] ObZVY\O] K UOc OMYXYWSM ^YZSM
KXN Z\Y`SNO] KM^S`S^SO] KXN W_V^SZVO MRYSMO [_O]^SYX] ^Y K]]O]] cY_\ _XNO\]^KXNSXQ
YP ^RO ]KWO +^ ^RO OXN YP OKMR _XS^ K ^OKMRO\ยพ] ^SZ S] QS`OX >RS] WKc \OWSXN cY_ YP K
UOc ZYSX^ aK\X cY_ KLY_^ K MYWWYX MYXP_]SYX QS`O cY_ KN`SMO YX RYa ^Y KZZ\YKMR
K [_O]^SYX Y\ \OMYWWOXN KX KM^S`S^c aRSMR aSVV OXRKXMO cY_\ _XNO\]^KXNSXQ >RO\O
S] KV]Y K ]_WWK\c YP ^RO WKSX ZYSX^] MY`O\ON SX ^RO _XS^ >RO _XS^] RK`O LOOX K\\KXQON SX^Y OSQR^ ]OM^SYX] +^ ^RO OXN YP OKMR ]OM^SYX ^RO\O
K\O KX]aO\] ^Y ^RO KM^S`S^SO] KXN W_V^SZVO MRYSMO [_O]^SYX] .Y XY^ VYYU K^ ^ROW
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 9
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^RO LYYU CY_ W_]^ \OWOWLO\ ^RK^ ^RO KX]aO\] SXMV_NON PY\ ]^\_M^_\ON [_O]^SYX]
K\O YXVc ]_QQO]^ON KX]aO\] >RO\O MKX LO NSPPO\OX^ KZZ\YKMRO] ZK\^SM_VK\Vc SX ^RO
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Z\YPO]]SYXKV Y\QKXS]K^SYX] >ROc \OQK\N S^ K] K \SQY\Y_] ]_LTOM^ ^RK^ NO`OVYZ] VYQSMKV
^RSXUSXQ KXN KXKVc^SMKV KXN WK^ROWK^SMKV KLSVS^c >RO\O K\O MO\^KSX MYXMOZ^] ¹ ]_MR K] YZZY\^_XS^c MY]^ KXN Z\SMO OVK]^SMS^c YP NOWKXN
KXN MO\^KSX ^YZSM] ¹ SXMV_NSXQ Z\SMO NO^O\WSXK^SYX _XOWZVYcWOX^ KXN SXÈK^SYX ^RK^
K\O MOX^\KV ^Y OMYXYWSM] >RO ]_LTOM^ RYaO`O\ S] O`O\ MRKXQSXQ K] XOa ^ROY\SO]
NO`OVYZ XOa SX]^S^_^SYX] K\O M\OK^ON KXN XOa Z\YLVOW] K\O OXMY_X^O\ON >RS] WKUO]
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G[X F^\__f bY Ta 8Vbab`\fg >Y LO K QYYN OMYXYWS]^ cY_ XOON ^Y LO SXPY\WON YP ^RO NO`OVYZWOX^] SX cY_\
OMYXYWc KXN Y^RO\ OMYXYWSO] CY_ XOON ^Y LO KLVO ^Y ^RSXU KXN a\S^O MVOK\Vc
KXN KZZVc \OVO`KX^ OMYXYWSM ^O\W] KXN MYXMOZ^] CY_ XOON ^Y LO MYXÇNOX^ SX
RKXNVSXQ ÇQ_\O] >RS] SX`YV`O] LOSXQ KLVO ^Y KNN NS`SNO ]_L^\KM^ W_V^SZVc MKVM_VK^O
ZO\MOX^KQO MRKXQO] KXN _XNO\]^KXN SXNOb X_WLO\] CY_ KV]Y XOON ^Y LO KLVO ^Y
N\Ka \OVO`KX^ aOVV VKLOVVON KXN KMM_\K^O NSKQ\KW] >RS] LYYU S] NO]SQXON ^Y ROVZ
cY_ NO`OVYZ ^RO]O ]USVV]
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 10
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PREPARING INTRODUCTION FOR EXAMINATION <O`S]SYX S] K MYX^SX_Y_] Z\YMO]] +P^O\ O`O\c VO]]YX MROMU cY_\ aY\U KXN SP
XOMO]]K\c KNN Ob^\K XY^O] +] KX ObKWSXK^SYX KZZ\YKMRO] cY_ aSVV XOON ^Y NY
SX^OX]S`O \O`S]SYX >\c ^Y OXQKQO SX KM^S`O \O`S]SYX >RS] SX`YV`O] XY^ T_]^ \OKNSXQ
XY^O] L_^ KV]Y _]SXQ ^RO SXPY\WK^SYX >RO\O K\O K X_WLO\ YP aKc] ^R\Y_QR aRSMR
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^ROW ^Y ^O]^ cY_ N\KaSXQ ]ZSNO\ NSKQ\KW] KXN Z\YN_MSXQ ^KLVO] KXN \O`S]SYX
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KV]Y RK`O ^Y NOWYX]^\K^O ^RO]O _XNO\ ObKWSXK^SYX MYXNS^SYX] =Y S^ S] O]]OX^SKV ^Y
NO`OVYZ ObKWSXK^SYX ^OMRXS[_O] ,OPY\O KX ObKWSXK^SYX MROMU Y_^ ^RO N_\K^SYX YP ^RO ObKWSXK^SYX KXN ^RO X_WLO\
YP [_O]^SYX] cY_ RK`O ^Y KX]aO\ <OKN ^RO SX]^\_M^SYX] YX ObKWSXK^SYX ZKZO\
MK\OP_VVc .Y XY^ \_]R SX^Y a\S^SXQ cY_\ KX]aO\] 3X KX]aO\SXQ W_V^SZVO MRYSMO ZKZO\] MYX]SNO\ O`O\c YZ^SYX SX K [_O]^SYX MK\OP_VVc
3P cY_ K\O _XMO\^KSX YP KX KX]aO\ ^Y K ZK\^SM_VK\ [_O]^SYX Z\YMOON P_\^RO\ KXN
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cY_ RK`O KX]aO\ON KVV ^RO [_O]^SYX] 8O`O\ VOK`O K [_O]^SYX _XKX]aO\ON O`OX SP
cY_ RK`O ^Y Q_O]] 3X KX]aO\SXQ ]^\_M^_\ON [_O]^SYX] \OKN ^RO [_O]^SYX] `O\c MK\OP_VVc ZKcSXQ
ZK\^SM_VK\ K^^OX^SYX ^Y ^RO NS\OM^S`O SX]^\_M^SYX aY\N] + [_O]^SYX] aRSMR K]U]
cY_ ^Y SNOX^SPc Y\ ]^K^O ]YWO^RSXQ aSVV YXVc \O[_S\O K L\SOP KX]aO\ MYX]S]^SXQ YP
K POa aY\N] 3X MYX^\K]^ K [_O]^SYX aRSMR K]U] cY_ ^Y ObZVKSX K]]O]] Y\ NS]M_]]
]YWO^RSXQ aSVV \O[_S\O K VYXQO\ KX]aO\ a\S^^OX SX ]OX^OXMO] KXN ZK\KQ\KZR]
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 11
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ACKNOWLEDGEMENT C[bgb VeXW\gf - F[hggXefgbV^ FXVg\ba <$ ! # ! ! ! # " ! " " #!"" ! !!# # !# ! FXVg\ba <<$ " "
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 12
11/6/13 4:24:22 PM
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 1
11/7/13 6:24:35 PM
CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 2
11/6/13 4:24:22 PM
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B\p Gf`ek Scarcity: a situation where there is not enough to satisfy everyone’s wants.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 3
*
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MKX LO Z\YN_MON QS`O] \S]O ^Y ^RO OMYXYWSM Z\YLVOW B\p Gf`ek The economic problem: unlimited wants exceed scarce resources.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 4
11/6/13 4:24:24 PM
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K\XZ_\iËj K`g It is very important to learn definitions. The more you apply a term such as scarcity in your work, the more you will become familiar with it. You may also want to compile your own economics dictionary by writing down terms in alphabetical order, as you come across them.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 5
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 6
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 7
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11/6/13 4:24:26 PM
B\p Gf`ek Land: gifts of nature available for production.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 8
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 9
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 10
11/6/13 4:24:27 PM
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 11
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11/6/13 4:24:28 PM
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 12
11/6/13 4:24:28 PM
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 13
(*
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 14
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 15
(,
11/6/13 4:24:29 PM
LE@K *
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 16
11/6/13 4:24:30 PM
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OMYXYWSM QYYN B\p Gf`ekj Economic good: a product which requires resources to produce it and therefore has an opportunity cost. Free good: a product which does not require any resources to make it and so does not have an opportunity cost.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 18
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100 80 60
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75 100 Agricultural goods
150
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B\p Gf`ek Production possibility curve: a curve that shows the maximum output of two types of products and combination of those products that can be produced with existing resources and technology.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 19
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11/6/13 4:24:32 PM
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K\XZ_\iËj K`g In explaining opportunity cost, it is always useful to give an example.
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 20
11/6/13 4:24:33 PM
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 21
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CUP O Level_Eco_Section-1_Ch.1 to Ch.3.indd 22
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CUP O Level_Eco_Section-2_Ch.4 to Ch.13.indd 28
11/6/13 4:36:54 PM
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CUP O Level_Eco_Section-2_Ch.4 to Ch.13.indd 31
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CUP O Level_Eco_Section-2_Ch.4 to Ch.13.indd 33
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B\p Gf`ek A mixed economy: an economy in which both the private and public sectors play an important role.
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