Rational choice theory is a branch of Economics that seeks to model people’s economic and social decision making. To do this it uses a number of tools including Game Theory. In order to predictably model choices, rational choice economics must assume that people are rational. That is they behave in…
Aggregate demand is one of the central concepts in macroeconomics. It is used to analyse changes in economic output and indicate the likely impact on other economic goals such as inflation, unemployment, budget balance and the balance of trade. Made up of consumption spending, investment spending, government spending and the…
Utilitarianism as a theory has had many incarnations. Act vs Rule Utilitarianism are just two examples of this but all flavours of utilitarianism have at their heart the concept of “the greatest good for the greatest number”. This is, of course, a simplification but it is the working definition of…
Costs are defined as money paid by a firm to obtain the factors of production. While you may understand what a cost is it is important that you are able to define the term succinctly in an exam to gain maximum credit. Types of Cost We split costs in to …
Unemployment is a measure of the number of people who are willing, able and actively seeking work at the going wage rate but cannot find it. Typically it is measured by the Labour Force Survey which seeks to establish whether people have been looking for work recently and whether they…
Inflation is the sustained rise in the general price level and is measured by calculating the percentage change in a price index. The main measures you will come across are the CPI (consumer price index) and the RPI (retail price index). They are calculated in different ways and so will…
There are many different measures of inflation but all the main ones work in the same way. They attempt to measure changes in the cost of living for the average consumer using a weighted basket of goods. The weighted basket A notional basket of goods is created and the cost…
Economic growth is an increase in the productive capacity of an economy. It is measured by comparing the GDP (total value of goods and services produced in an economy) in one year to GDP in the next. For the A Level course you need to understand what economic growth is,…