Cambridge International Education material in this publication is reproduced under licence and remains theintellectual property of Cambridge University Press Assessment.Third-party websites and resources referred to in this publication are not endorsed.All questions have been written by the authors.Although every effort has been made to ensure that website addresses are correct at time of going to press,HachetteLearning cannot be held responsible for the content of any website mentioned in this book.It is sometimes possible tofind a relocated web page by typing in the address of the home page for a website in the URL window of yourbrowser.Hachette UK's policy is to use papers that are natural,renewable and recyclable products and made from wood grownin well-managed forests and other controlled sources.The logging and manufacturing processes are expected toconform to the environmental regulations of the country of origin.To order,please visit www.HachetteLearning.com or contact Customer Service at education@hachette.co.uk /+44(0)1235827827.ISBN:9781036010737eISBN:9781036010508Paul Hoang and Margaret Ducie 2025First published in 2013Second edition published in 2018This edition published in 2025 byHachette Learning,An Hachette UK CompanyCarmelite House50 Victoria EmbankmentLondon EC4Y ODZwww.HachetteLearning.comThe authorised representative in the EEA is Hachette Ireland,8 Castlecourt Centre,Dublin 15,D15 XTP3,Ireland(email:info@hbgi.ie)Impression number 10 9 8 7 6 5 43 2 1Year20292028202720262025All rights reserved.Apart from any use permitted under UK copyright law,no part of this publication may bereproduced or transmitted in any form or by any means,electronic or mechanical,including photocopying andrecording,or held within any information storage and retrieval system,without permission in writing from thepublisher or under licence from the Copyright Licensing Agency Limited.Further details of such licences(forreprographic reproduction)may be obtained from the Copyright Licensing Agency Limited,www.cla.co.ukCover photo @Rawpixel.com-stock.adobe.comIllustrations by Aptara Inc.Typeset in India by Aptara IncPrinted in Great Britain by Bell and Bain Ltd,GlasgowA catalogue record for this title is available from the British Library.MIXPaper I SupportingFSCresponslble forestryFSC"C104740ContentsIntroductionSECTION 1 The basic economic problem1 The nature of the basic economic problem2 The factors of production3 Opportunity cost4 Production possibility curve diagramsSECTION 2 The allocation of resources5 The role of markets in allocating resources6 Demand7 Supply8 Price determination9 Price changes10 Price elasticity of demand11 Price elasticity of supply12 Market economic system13 Market failure14 Mixed economic systemSECTION 3 Microeconomic decision-makers15 Money and banking16 Households17 Workers18 Firms19 Firms and production20 Firms'costs,revenue and objectives21 Types of marketsSECTION 4 Government and the macroeconomy22 Government macroeconomic intervention23 Fiscal policy25 Supply-side policy26 Economic growth27 Employment and unemployment28 InflationSECTION 5 Economic development29 Living standards30 Poverty31 Population32 Differences in economic development between countriesSECTION 6 International trade and globalisation33 Specialisation and free trade34 Globalisation and trade restrictions35 Foreign exchange rates36 Current account of the balance of paymentsGlossaryIndexIntroductionThis book has been written for all students of Cambridge IGCSETM,IGCSE(9-1)and O Level Economics(0455/0987/2281),and supports the syllabuses for examination from 2027.It provides the detail and guidance that areneeded to support you throughout the course and help you prepare for your examinations.It will also be of great useto anyone who wants to learn more about the key concepts of economics.This book will be valuable to students of economics whether you are:studying the subject for the first time at school or college and need a comprehensive and clearly written textbookrevising the subject before your examinations and need a study guide to help you with key definitions,techniquesand examination advicestudying the subject on your own through distance or open learning and need a complete programme of supportivequestions and activities with suggested answers.Building on the successful formula of the previous edition,this third edition updates all existing chapters.Materialthat is no longer covered by the new syllabus has been removed and new subject material has been added.This book has been written with the international student in mind.It explains economic theory using real-lifeexamples and case studies from around the world.How to use this bookTo make your study of economics as rewarding and successful as possible,this textbook,which is endorsed for theCambridge Pathway,offers the following important features:Chapter overviewEach chapter starts with an outline of the subject material to be covered.OrganisationThe content is in the same order as the syllabus:chapter titles and chapter section headings match those of thesyllabus.ApproachThe subject material is written in an informative yet lively way that allows complete understanding of each topic to begained.Practice questionsThese questions are16Householdsdesigned to show youthe different types ofDefinitionsquestions relevant to theDefinitions of keysyllabus and to prepareterms help youyou for assessment.Notedevelop your usethat the questions withinof economicsthe chapters are only partterminology.questions,as they areintended to consolidateunderstanding of thespecific chapter beingreviewed.Revision checklistThis checklist lists theChapter review questionskey concepts and topicsyou have covered in theThese questions,which correspondchapter and the key pointswith the chronological order of the text.you need to know.encourage you to read,reflect and writeyour own answers.