Cambridge International as and a level Economics Ebook

32
Cambridge International AS Level Economics

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3
A standard for deferred payment: Not all payments we 
make are immediate. Some household bills are paid 
monthly, others may be paid annually. Following on from 
money as a unit of account, payments can be made in the 
future once terms have been agreed between the parties 
involved.
4
A store of wealth:
 
Money can be held or ‘stored’ for a period 
of time, usually with a bank or other financial institution, 
before it is used. This important function means that 
money is a measure of value over time. Where this value is 
accumulated, then it represents a source of wealth to its 
owner. In 2011, the two richest people in the world were 
both from the USA: Warren Buff et and Bill Gates. Their 
personal wealth was in a wide range of assets, not just in 
bank accounts. Money was the common basis on which 
their wealth was estimated.
Th
ese functions of money are vital for the smooth 
operation of all economies. If any of the functions breaks 
down – as in the case of Zimbabwe, where money lost all 
meaning as a store of value or wealth – economic collapse 
is the inevitable outcome. It is therefore essential that a 
prudent government puts economic policies in place to 
ensure that this does not happen.
Classification of goods and 
services
Th
e fundamental economic problem of scarce resources in 
relation to unlimited wants only arises in situations where 
we are dealing with what are known as 
private goods
.
 
Th
ese 
are also known as economic goods since they have a cost 
in terms of the resources used and are scarce. A price must 
therefore be charged when they are used or consumed.
Private goods: 
consumed by someone and not available to 
anyone else.
KEY TERM
Private goods are those bought and consumed by 
individual consumers or fi rms for their own benefi t. Most 
of the goods we consume on a daily basis are private 
goods. Th
ey have two important characteristics: