Introduction to Economics is a core part of GCSE Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
EconomicsStudy of how scarce resources are allocated among competing uses to satisfy unlimited human wants.
ScarcityFundamental problem that resources are limited while wants are unlimited, forcing choices.
Factors of productionFour resources: land, labour, capital and enterprise; combined to produce goods and services.
MicroeconomicsStudy of individual markets and decisions of households and firms; e.g. price of a single product.
MacroeconomicsStudy of the economy as a whole: GDP, inflation, unemployment, balance of payments.
Smith (1776)Adam Smith's 'Wealth of Nations' argued the invisible hand of market exchange allocates resources efficiently.
MultiplierHow an injection ripples into a bigger rise in output.
MPCMarginal propensity to consume — share of new income spent.
MPSMarginal propensity to save — share of new income saved.
Budget deficitGovernment spends more than it raises in tax.
Net exportsExports minus imports (X − M).
Real GDPTotal output adjusted for inflation.
Aggregate supplyTotal output firms produce at each price level.
Fiscal policyUse of tax and government spending to steer AD.
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
What does economic scarcity mean?✗ Simply that something is rare. ✓ Unlimited wants exceed limited resources, forcing choices.
What is the difference between fixed and variable costs?✗ Fixed costs never change at all, ever. ✓ Fixed costs don't change with output (e.g. rent, salaries); variable costs change directly with output (e.g. raw materials, hourly wages).
What is the technical definition of a recession?✗ A recession is when prices fall and people lose jobs. ✓ Two consecutive quarters of negative real GDP growth — a contraction of the economy.
Which of these would DECREASE AD?✗ Tax cut for households ✓ Higher interest rates
What does price elasticity of demand measure?✗ PED measures how flexible or stretchy a product is. ✓ The responsiveness of quantity demanded to a change in price — the percentage change in quantity divided by the percentage change in price.
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