Cambridge International as and a level Economics Ebook

particularly concerned with studying the behaviour of 
humans as consumers, in business or in taking decisions 
about the economy as a whole. More specifi cally, 
Economics is the study of how scarce resources are or should 
be allocated
. All of the problems and issues you will come 
across fi t into this broad defi nition.
Regardless of what you may think about Economics 
and economists at this stage of your Cambridge studies, 
few would deny that Economics is a logical subject and 
that the advice provided by economists is derived from a 
set of well-established principles relating to the operation 
of the market economy. 
Figure 1
shows, in simple terms, 
how economists think and how they seek to explain real 
problems and issues like those you will have come across 
in the fi rst self-assessment task.
At this stage, bear this process in mind and return to it 
whenever you are learning new concepts as it will help you 
understand how economists think and operate.
Economists cannot always be certain that what they 
say is completely accurate or how the advice they provide 
will aff ect an economy. Much of the content of this book 
consists of positive statements that are factual and usually 
acceptable to all economists. For example:
■
the inflation rate in Egypt in 2013 was 2%
■
Spain had a budget deficit in 2013.
On other occasions, economists make normative 
statements involving value judgements. For example:
■
the government should cut fuel tax to reduce the rate of 
inflation
■
public sector workers should reduce their demands for 
higher wages.
Th
ese latter statements express an opinion about what ought 
to happen. Unlike positive statements, where economists 
can use data and practical evidence, normative statements 
involve value judgements, which are oft en drawn from the 
economist’s personal views, political beliefs and ethics. As 
you study the content of the chapters, keep this important 
distinction in mind. You will also need to think about it 
when answering some of the more demanding questions.
It is now appropriate to give a fuller defi nition of 
Economics. We have established that Economics is a social 
science. More specifi cally, it is the study of how society 
provides for itself by making the most effi
cient use of scarce 
resources so that both private and social welfare may be 
improved. Economics provides a framework for studying 
how individuals, households, fi rms, governments and global 
organisations behave and take a wide range of decisions.
Interest in Economics has never been stronger than it 
is at present. In 2008 and part of 2009 the global economy 
was thrown into the most serious recession of modern 
times. Th
e eff ects of the downturn were worldwide. Rich, 
poor and emerging economies were all aff ected. In turn, 
there was a profound impact on the lives and economic 
well-being of people throughout the world.
In 2010 the global economy started to recover but as 
the article in Self-assessment task 2 shows, there was still 
some concern in 2014 that the recovery might not last. 
Read through the article and see if you can answer some of 
the questions that follow.
Problem
Analysis
Outcome
Feedback
Evaluation
Statement of a particular economic problem or issue.
Application of concepts and techniques of Economics.
The result of economic analysis.
An appraisal of the extent to which the outcome is acceptable for individuals or groups.