IGCSE Economics

Economics is about how people use resources 资源 to meet their needs and wants. The main idea is simple. People want a lot, but there are not enough resources to make everything. This is the economic problem 经济问题.

Two facts cause the economic problem:

• Resources are finite 有限的. There is only a limited amount of them.
• People's wants 欲望 are unlimited. People always want more and better things.

Because wants are unlimited but resources are limited, resources are scarce 稀缺. We call this problem scarcity 稀缺性. Scarcity is the root of all economics.

Goods, services, and choices

We use resources to make goods 物品 (things you can touch, like food and phones) and services 服务 (jobs done for you, like a haircut or a bus ride).

Because resources are scarce, we cannot have everything. So everyone must make choices. Scarcity forces four groups to choose:

• consumers 消费者 — people who buy and use goods and services. They choose what to buy.
• workers 工人 — they choose which job to do.
• producers 生产者, also called firms 企业 — they make goods and services. They choose what to produce.
• governments 政府 — they choose what to provide and how to spend public money.

Economic goods and free goods

Most things are economic goods 经济物品. They are scarce, so making or using one means giving something else up. Economic goods have an opportunity cost 机会成本 (explained below).

A few things are free goods 免费物品. They are not scarce — there is enough for everyone and they cost nothing to use. Examples are the air you breathe and sunlight. A free good has no opportunity cost.

Be careful: a "free" sample or a "free" gift is not a free good. Resources were used to make it, so it is still an economic good.

To make goods and services, firms use four types of resource. We call them the factors of production 生产要素.

The four factors

The person who provides enterprise is the entrepreneur 企业家. They bring the other factors together and risk their own money to start and run a business.

The reward to each factor

Each factor earns a reward 报酬 — the income it gets for being used:

Mobility, quantity and quality

The mobility 流动性 of a factor means how easily it can move to a different use or place. A worker with many skills can change jobs easily, so labour is mobile. A worker with only one skill, or a factory that cannot be moved, is less mobile.

The quantity and quality of factors can change:

• Quantity can rise or fall. The amount of labour grows if the birth rate rises or people move into the country to work. Land can be lost to the sea or gained by draining it.
• Quality can rise. Training and education make labour better. New technology makes capital better. Higher quality means each factor can produce more.

When you choose one thing, you give up the next best choice. That is the real cost of your decision.

Opportunity cost is the next best alternative 替代选择 you give up when you make a choice.

It affects every decision-maker:

• A consumer who buys a game gives up the book they could have bought instead.
• A worker who takes one job gives up the pay of the next job they could have done.
• A producer who makes more cars uses factors that could have made trucks.
• A government that builds a hospital gives up the school it could have built with the same money.

Opportunity cost matters because resources are scarce. Every choice has a cost, even when no money changes hands.

A production possibility curve 生产可能性曲线 (PPC) shows the largest amounts of two goods a country can make when it uses all its resources fully.

Imagine an economy that makes only two types of good, one on each axis:

• capital goods — used to make other goods, like machines.
• consumer goods — used up by people, like food and clothes.

The PPC is the line joining every point where the economy uses all its resources to make the most it can.

Reading the diagram

Picture the two goods on the two axes. The PPC is a curve that bends from one axis down to the other (it usually bows outward, away from the corner):

• A point on the curve: all resources are used fully. The economy makes the most it can.
• A point inside the curve: resources are wasted or not all used — for example, there is unemployment 失业. The economy could make more.
• A point outside the curve: this is impossible now. There are not enough resources to reach it.

Movements along the curve

If the economy already uses all its resources (a point on the curve), making more of one good means making less of the other. You must move factors from one good to the other. This is a trade-off 取舍.

The amount of the second good you give up is the opportunity cost of the extra first good. This is why the PPC is a clear picture of opportunity cost.

Worked example. An economy on its PPC makes 40 machines and 60 tonnes of food. To make 50 machines it must cut food to 45 tonnes. Give the opportunity cost of the extra machines. Then say what a point of 30 machines and 40 tonnes of food would tell you. The economy is already on the curve, so more of one good must mean less of the other: the 10 extra machines cost 60 − 45 = 15 tonnes of food. That lost food is the opportunity cost, so quote it in tonnes of food - never in money. The second point lies inside the curve, which means resources are idle or wasted, most likely through unemployment; from there the economy could make more of both goods, so moving out to the curve costs nothing at all. Opportunity cost only bites once you are on the curve.

Shifts of the curve

The whole curve can move:

• It shifts outward (to the right) when the country can make more of both goods. This is economic growth 经济增长. Causes: more resources (a bigger workforce, more land discovered) or better-quality resources (training, new technology).
• It shifts inward (to the left) when the country can make less. This is economic decline 经济衰退. Causes: fewer or worse resources — for example a war, a natural disaster, or using up non-renewable resources 不可再生资源 (resources like oil and coal that cannot be replaced once used).

Do not confuse the two. Moving from inside the curve to the curve (by using idle resources) is a short-term gain. Moving the whole curve outward is a long-term change.

• Scarcity (unlimited wants, limited resources) forces choice, and every choice has an opportunity cost — the next best alternative you give up.
• Learn the four factors of production and the reward each earns: land–rent, labour–wages, capital–interest, enterprise–profit.
• On a PPC, a point on the curve uses all resources fully, inside wastes some (e.g. unemployment), and outside is impossible for now. Moving along the curve shows opportunity cost.
• Moving to the curve (using idle resources) is a short-term gain; shifting the whole curve outward is long-term economic growth from more or better resources.

Vocabulary card meanings

goods: Physical items offered for sale. reward: What a factor of production is paid for its use. rent: Payment to the owner of land for letting others use it. mobility: How easily workers or capital can move to another use. alternative: Another option that could be chosen instead. economic decline: A period when output and incomes fall. non-renewable resources: Natural inputs that are not restored on a human timescale once they are used.

Economics is split into two parts:

• microeconomics 微观经济学 — the study of single parts of the economy, such as one industry or one product.
• macroeconomics 宏观经济学 — the study of the whole economy, like total jobs, prices, and growth.

A market 市场 is any place or system where buyers and sellers meet to trade. It does not need a building — it can be online or over the phone.

When a market is free, no one is in charge of deciding what to make. Instead, the price mechanism 价格机制 (the free movement of prices) allocates 配置 resources 资源 — it decides what is made, how, and for whom. Price does three jobs:

• the signalling 信号 function — a price change tells buyers and sellers what is happening. A rising price signals "make more"; a falling price signals "make less".
• the incentive 激励 function — a higher price gives firms 企业 a reason to produce more, because they can earn more.
• the rationing 配给 function — when a product is scarce, its price rises. The high price shares out the limited amount to those willing to pay.

Demand 需求 is the amount of a good 物品 that consumers 消费者 (buyers) are willing and able to buy at each price, in a period of time.

The law of demand 需求定律 says: when the price of a good rises, the quantity demanded falls; when the price falls, the quantity demanded rises. Price and quantity move in opposite directions — an inverse relationship 反向关系. This is true ceteris paribus 其他条件不变 (a Latin phrase meaning "all other things stay the same").

Movements and shifts

It helps to separate two ideas:

• quantity demanded 需求量 — the amount bought at one price.
• demand — the whole pattern of buying at every price.

On a demand diagram, price is on the up axis and quantity on the across axis. The demand curve 需求曲线 slopes downward from left to right: high price, low quantity; low price, high quantity.

• A change in the good's own price causes a movement along the demand curve. You slide to a new point on the same line.
• A change in any other condition causes a shift 移动 of the whole curve. A rightward shift means more is demanded at every price; a leftward shift means less.

Conditions of demand

These are the things (other than the good's own price) that shift the demand curve:

• income 收入 — more income usually means more demand.
• tastes 偏好 — if a good becomes popular, demand rises.
• price of substitutes 替代品 — goods used instead of each other (tea and coffee). If coffee gets dearer, demand for tea rises.
• price of complements 互补品 — goods used together (cars and fuel). If cars get dearer, demand for fuel falls.
• population 人口 — more people means more demand.
• advertising 广告 — good adverts raise demand.

Supply 供给 is the amount of a good that firms are willing and able to sell at each price, in a period of time.

The law of supply 供给定律 says: when the price rises, the quantity supplied rises too. Price and quantity move the same way — a direct relationship 正向关系. Firms supply more at a high price because they can earn more.

Movements and shifts

• quantity supplied 供给量 — the amount offered at one price.
• The supply curve 供给曲线 slopes upward from left to right.
• A change in the good's own price → a movement along the curve.
• A change in any other condition → a shift of the whole curve.

Conditions of supply

• costs of production 生产成本 — if costs rise, firms supply less (curve shifts left).
• technology 技术 — better technology lowers costs, so supply rises.
• taxes and subsidies — a tax 税收 on a good raises firms' costs (supply falls); a subsidy 补贴 (money from the government) lowers costs (supply rises).
• weather — important for farm goods.
• number of firms — more firms means more supply.

The price of a good is set where demand and supply meet. Draw both curves on one diagram. They cross at a single point. This point gives:

• the equilibrium 均衡 price — the price where the amount buyers want to buy exactly equals the amount firms want to sell.
• the equilibrium quantity — the amount traded at that price.

At equilibrium, quantity demanded equals quantity supplied. There is no good left over and no buyer left waiting.

When a curve shifts, the crossing point moves, so price and quantity change:

• Demand rises (shifts right): price rises and quantity rises.
• Demand falls (shifts left): price falls and quantity falls.
• Supply rises (shifts right): price falls and quantity rises.
• Supply falls (shifts left): price rises and quantity falls.

Disequilibrium

If the price is not at equilibrium, the market is in disequilibrium 非均衡:

• If price is below equilibrium, buyers want more than firms supply. This is excess demand 超额需求, also called a shortage 短缺. Buyers compete, so the price is pushed up until equilibrium returns.
• If price is above equilibrium, firms supply more than buyers want. This is excess supply 超额供给, also called a surplus 过剩. Sellers cut the price until equilibrium returns.

Price elasticity of demand 需求价格弹性 measures how much the quantity demanded changes when the price changes.

PED = (% change in quantity demanded) ÷ (% change in price)

(We usually ignore the minus sign and read the size of the number.) The determinants 决定因素 (the things that decide PED) include whether the good has close substitutes, whether it is a need or a luxury, and what share of income it takes.

Worked example. When the price of a good rises by 20%, the quantity demanded falls by 10%. Find the PED.

PED = (% change in quantity demanded) ÷ (% change in price) = 10 ÷ 20 = 0.5.

Because 0.5 is less than 1, demand is inelastic — the quantity changed by a smaller percentage than the price.

Reading the value

• PED greater than 1: demand is elastic 富有弹性. Quantity changes by a large %. (Goods with many substitutes, like one brand of crisps.)
• PED less than 1: demand is inelastic 缺乏弹性. Quantity changes by a small %. (Needs with few substitutes, like petrol or salt.)
• PED equal to 1: unit elastic 单位弹性. Quantity changes by the same % as price.

PED and total revenue

Total revenue 总收益 is the money a firm gets from sales: price × quantity sold. (To the buyer, the same money is total expenditure 总支出.) PED tells a firm what happens to revenue if it changes its price:

• If demand is inelastic, raising the price raises total revenue (quantity falls only a little).
• If demand is elastic, raising the price lowers total revenue (quantity falls a lot).

This is useful. A firm sets prices knowing how buyers will react. A government taxes inelastic goods (like cigarettes) because people keep buying them, so the tax raises a lot of money.

Worked example. A bus company sells 1,000 tickets a day at £2 each. It raises the price by 10% to £2.20, and daily sales fall by 5% to 950. Find the PED and what happens to total revenue.

• PED = 5 ÷ 10 = 0.5, so demand is inelastic (less than 1).
• old revenue = £2 × 1,000 = £2,000.
• new revenue = £2.20 × 950 = £2,090.

Total revenue rose by £90. Because demand is inelastic, the price rose by a bigger percentage than the quantity fell, so raising the price raised revenue.

Price elasticity of supply 供给价格弹性 measures how much the quantity supplied changes when the price changes.

PES = (% change in quantity supplied) ÷ (% change in price)

Supply is elastic if PES is greater than 1, and inelastic if PES is less than 1.

Worked example. When the price of a good rises by 10%, the quantity supplied rises by 30%. Find the PES.

PES = (% change in quantity supplied) ÷ (% change in price) = 30 ÷ 10 = 3.

Because 3 is greater than 1, supply is elastic.

The determinants of PES are:

• time — supply is more elastic over a long time, because firms can change how much they make.
• spare capacity 闲置产能 — if a firm has unused machines and workers, it can raise output quickly, so supply is elastic.
• stocks 库存 — goods kept in store can be sold quickly, making supply elastic.
• ease of switching factors — if a firm can move factors of production to make this good easily, supply is more elastic.

Farm goods often have inelastic supply in the short run, because crops take a season to grow.

In a market economy 市场经济, the price mechanism makes all the choices. There is no government planning. (The opposite is a planned economy 计划经济, where the government makes the choices.)

Advantages of the market system:

• Prices guide resources to where they are wanted, without anyone planning.
• Firms compete, so they cut costs and create new and better goods.
• Consumers have wide choice.

Disadvantages:

• Some useful goods are not made because they earn no profit.
• The strong (rich firms and people) do well; the weak may be left with nothing.
• Markets can fail (see below).

Market failure 市场失灵 happens when the price mechanism leads to an inefficient 低效率 use of resources — resources are not shared out in the best way for society. The main causes:

External costs and benefits

When you produce or consume something, the cost or benefit to you is not always the cost or benefit to everyone.

• a private cost 私人成本 is the cost to the person doing the activity.
• an external cost 外部成本 is a cost paid by other people — for example, smoke from a factory harms nearby families.
• the social cost 社会成本 is the private cost plus the external cost (the cost to the whole of society).

In the same way:

• a private benefit 私人效益 is the benefit to the person doing the activity.
• an external benefit 外部效益 is a benefit that others get for free — for example, your neighbour's tidy garden is nice for you too.
• the social benefit 社会效益 is the private benefit plus the external benefit.

Markets fail because firms and consumers only think about their private costs and benefits, not the external ones.

Merit, demerit and public goods

• merit goods 有益物品 are better for you than you realise, so the market makes too few (education, healthcare).
• demerit goods 有害物品 are worse for you than you realise, so the market makes too many (cigarettes, alcohol).
• public goods 公共物品 are things everyone can use and no one can be stopped from using, like street lights or national defence. The market makes none, because firms cannot charge for them.

Abuse of monopoly power

A monopoly 垄断 is a single firm that controls a market. With no competition, it can charge high prices and make poor-quality goods. This is another market failure.

A mixed economy 混合经济 has both:

• a private sector 私营部门 — firms owned by people, guided by the price mechanism.
• a public sector 公共部门 — activity run by the government.

Most real economies are mixed; China's, for example, is a socialist market economy. The government steps in to correct market failure. This is government intervention 干预. The main methods:

Judging intervention

Intervention can fix market failure, but it has costs. Taxes and rules cost money to collect and check. Governments can get things wrong too (this is called government failure). So you should always weigh the good effects against the bad ones before deciding.

• A change in a good's own price is a movement along the curve; a change in anything else (income, tastes, related prices) shifts the whole curve.
• Equilibrium is where demand meets supply. Below it there is excess demand (a shortage, so price rises); above it there is excess supply (a surplus, so price falls).
• PED = %ΔQ ÷ %ΔP. Demand is inelastic if PED < 1 (raising price raises revenue) and elastic if PED > 1 (raising price lowers revenue).
• Market failure (external costs, merit/demerit/public goods, monopoly) means resources are used badly; the government corrects it with taxes, subsidies, rules and direct provision.

Vocabulary card meanings

signalling: Passing information through a visible choice, such as gaining a qualification. good: A physical item that can be purchased. ceteris paribus: The assumption that every other factor stays unchanged. total expenditure: The whole amount spent, price times quantity. planned economy: An economy in which the state allocates resources. inefficient: Using more resources than necessary for the output gained. intervention: Action by government that changes what a market would have done.

Long ago, people swapped goods directly. This is called barter 物物交换. Barter is hard: you must find someone who has what you want and wants what you have. Money 货币 solves this problem.

The functions of money

Money does four jobs:

• a medium of exchange 交换媒介 — you swap money for goods, so you do not need barter.
• a store of value 价值储藏 — you can hold money now and spend it later, although inflation may reduce what it can buy.
• a unit of account 记账单位 — money measures and compares the value of things (this is the price).
• a means of deferred payment 延期支付手段 — you can buy now and pay later.

The characteristics of money

Good money must be:

• durable 耐用的 — it lasts a long time.
• portable 便于携带的 — easy to carry.
• divisible 可分割的 — can be split into small amounts for small payments.
• limited in supply, hard to copy, and widely accepted for payment.

Banks

• A central bank 中央银行 is the government's bank. Its roles include issuing currency, serving government and banks, and managing monetary policy. Its policy decisions can influence interest rates 利率; it does not set every bank loan rate.
• commercial banks 商业银行 are the ordinary banks that people and firms 企业 use. They take deposits, lend money, and arrange payments. Deposits are not a promise that money keeps its purchasing power.

A household 家庭 is a person or group living together and making money decisions. Each household must choose how much to spend, save, and borrow.

• saving 储蓄 is income that is not spent now.
• borrowing 借贷 is spending money you do not have yet, and paying it back later (usually with an extra charge).

Three main things change these choices:

• income 收入 — more income can allow more spending and saving; debts and household needs also matter.
• interest rates — a higher interest rate makes saving more rewarding and borrowing dearer. This tends to encourage saving and discourage borrowing, other things unchanged. A household with little spare income may still be unable to save.
• confidence 信心 — if people feel sure about their jobs and the future, they may spend and borrow more. Worry may encourage saving, if they can afford it.

Choosing a job

When a worker chooses an occupation 职业 (a type of job), two kinds of factor matter:

• wage factors — the pay. The wage 工资 is the money you earn. Higher pay tends to attract workers, but conditions and access to training also matter.
• non-wage factors — everything else: working hours, holidays, how safe or pleasant the job is, whether you enjoy the work, distance from home, and the chance to move up to a higher job.

Original decision case. Is B necessarily better? Use the facts above.

Worked decision. Wage after travel = weekly wage − weekly travel cost. A: £400 − £20 = £380. B: £440 − £60 = £380. A offers shorter travel and training. B may suit someone who prefers nights; the decision depends on preferences, not gross pay alone.

Why workers earn different amounts

Workers are not all paid the same. The reasons include:

• skill 技能 and qualifications 资格 — scarce skills can restrict labour supply. If firms also demand those skills, pay may be higher. Years of study alone do not guarantee high pay.
• danger — risky or dirty jobs may pay more to attract workers.
• trade unions 工会 — a trade union is a group of workers who join together to bargain for better pay and conditions. Strong unions can raise pay.
• discrimination 歧视 — unfair treatment because of gender, race, or age can cause unfair pay gaps.

Original wage case. A town has few qualified repair technicians and many applicants for assistant jobs. Repair orders rise, but technician training takes two years. More orders increase firms' demand for technicians; slow supply expansion may encourage higher pay. This explains a possible difference without claiming every qualified worker earns more. Average revenue means revenue per unit sold, not per worker or a universal wage ceiling.

Division of labour

Division of labour 劳动分工 (also called specialisation 专业化) means splitting a job into small tasks, with each worker doing one task again and again.

Advantages: workers get faster and better at their one task; less time is wasted moving between tasks; this can raise productivity and output. If costs do not rise proportionately, unit cost falls.

Disadvantages: doing one task is boring, so workers may make mistakes or leave; if one worker is absent, the whole line can stop; each worker learns only one skill.

Original productivity case. The same three workers make 30 boxes in one hour before specialisation and 45 after. Other inputs are unchanged. Calculate productivity before and after.

Worked answer. Productivity = output ÷ (workers × hours). Before: 30 ÷ (3 × 1) = 10 boxes per worker per hour. After: 45 ÷ (3 × 1) = 15 boxes per worker per hour. Repetition can save switching time. If total hourly cost is unchanged, cost per box falls. An absent packer could stop completion of boxes.

The size of firms

Firms come in many sizes, from one person to huge companies. We can measure size by the number of workers, the amount of capital 资本 used, or the output.

Some firms stay small because: the market 市场 is small; the product is personal (like a hairdresser); the owner wants to stay in control; or there is little money to grow.

How firms grow

Firms grow by selling more, or by joining with other firms. When two firms join, it is a merger 合并. In a takeover, one firm gains control of another. There are three types:

• horizontal merger 横向合并 — two firms at the same stage of the same industry join (two car makers).
• vertical merger 纵向合并 — two firms at different stages of the same industry join (a car maker and a tyre maker). "Backward" is towards the supplier; "forward" is towards the seller.
• conglomerate merger 混合合并 — two firms in different industries join (a car maker and a food company).

Original classification case. A bakery joins another bakery, its flour mill, bread shops, or a clothing producer. Classify each and explain a possible benefit.

Worked answer. Another bakery is horizontal integration: bulk buying may lower cost, but rivalry falls. The flour mill is backward vertical integration: greater supply control, but milling needs different skills. Bread shops are forward vertical integration: control of outlets, with retail management costs. Clothing is conglomerate integration: spreading risk, with no guarantee either business succeeds.

Business failure

Original survival case. Monthly revenue is £4,000; costs are £4,500. Profit = TR − TC = £4,000 − £4,500 = −£500. Tomorrow a £2,000 bill is due, but cash available is £300 with no agreed loan. Payment shortfall = £2,000 − £300 = £1,700. A loss and a cash shortage are different threats to survival.

Firms can suffer business failure 企业倒闭 (closure) because of high costs, low sales, poor management, strong rivalry, insufficient cash or falling demand 需求.

Labour-intensive and capital-intensive

• labour-intensive 劳动密集型 production uses relatively more labour 劳动 than capital equipment — for example, hand-made crafts.
• capital-intensive 资本密集型 production uses relatively more capital equipment than labour — for example, a modern car factory.

Original production choice. Method A makes 100 shirts daily with ten workers and simple tools. B makes the same quantity and quality with two operators and automated equipment. A uses relatively more labour; B uses relatively more capital. B may suit stable large orders and scarce labour. A may suit custom orders or limited finance. Compare equipment costs, wages, training, availability and flexibility; counting workers alone does not decide profit.

Productivity

Productivity 生产率 means output per worker (or per machine) in a set time. Higher productivity means more output per worker in the same time. Unit cost falls only if total cost does not rise proportionately. Training, better machines and management can improve productivity.

Demand for and supply of factors

Firms buy factors of production 生产要素 (land 土地, labour, capital, and enterprise 企业家才能). Factor prices and quantities are influenced by demand, supply, bargaining and policy. Product demand, factor prices, availability and productivity affect what firms use. For example, if many firms want skilled workers, their wages may rise if supply cannot expand enough.

Original factor choice. A shirt producer receives more orders. Trained workers are available, but new automated machines take six months to deliver and need costly installation. Hiring workers can expand output sooner; machinery may suit later, stable orders if its productivity justifies its cost. Higher wages alone do not make machinery available or worthwhile.

Economies and diseconomies of scale

As a firm grows and makes more, the cost of each unit can change:

• economies of scale 规模经济 — a larger scale of production lowers long-run average cost. Reasons: buying materials in bulk is cheaper, big machines work more efficiently, and large firms borrow money cheaply.
• diseconomies of scale 规模不经济 — a larger scale of production raises long-run average cost because coordination or other problems outweigh gains. Reasons: a huge firm is hard to manage, messages travel slowly, and workers may feel less important.

Original scale calculation. Compare long-run alternatives with all inputs adjustable. A small plant makes 1,000 units monthly at total cost £8,000; a larger plant makes 2,000 at £14,000. Average cost = TC ÷ output. Small: £8,000 ÷ 1,000 = £8 per unit. Large: £14,000 ÷ 2,000 = £7 per unit. Total cost rises, but average cost falls: economies of scale. Bulk discounts or specialised equipment could explain it. This differs from spreading unchanged rent over more output in an existing plant.

These can be internal (caused by the firm's own size) or external (caused by the whole industry growing).

Costs

A cost 成本 is money a firm spends to produce. Costs split into:

• fixed costs 固定成本 — costs that do not change with output within a given period and range, such as rent and insurance. You pay them even if you make nothing.
• variable costs 可变成本 — costs that change with output, such as materials and production-related electricity. More output means more variable cost.
• total cost 总成本 — fixed cost plus variable cost.
• average cost 平均成本 — the cost of each unit: total cost divided by the number of units made.

Revenue

Revenue 收益 is the money a firm gets from selling its goods.

• total revenue 总收益 — the price multiplied by the quantity sold.
• average revenue 平均收益 — total revenue divided by the quantity sold (this is the same as the price).

Profit and other objectives

Profit 利润 is what is left after costs:

profit = total revenue − total cost

Worked example. A firm has fixed costs of £2,000 and variable costs of £3 per unit. It makes 500 units and sells them at £10 each. Find its total cost, total revenue, profit and average cost.

• variable cost = 3 × 500 = £1,500, so total cost = 2,000 + 1,500 = £3,500.
• total revenue = 10 × 500 = £5,000.
• profit = 5,000 - 3,500 = £1,500.
• average cost = total cost ÷ units = 3,500 ÷ 500 = £7 per unit.

The firm makes a profit because the price (£10) is above the average cost (£7).

Most firms want as much profit as possible. But firms can have other objectives 目标:

• survival 生存 — a new firm first just wants to stay open.
• growth 增长 — getting bigger, to gain economies of scale and market power.
• social objectives — some firms aim to help people or protect the environment, not only to earn profit.

Markets differ by how many firms there are and how hard it is for new firms to join.

Competitive markets

A competitive market has many firms selling similar goods, and it is easy for new firms to enter. This is strong competition 竞争. In such a market:

• buyers may switch suppliers, putting pressure on prices and quality.
• rivalry can encourage cost reduction and new products.

Consumers may gain lower prices, wider choice and better quality. These gains depend on information, switching costs and how strongly firms compete.

Original competition case. Shop A sells a loaf for £2; nearby B sells an equally fresh, equally sized loaf for £1.80. Customers know both prices and can switch easily. A may lose sales, encouraging a price cut, better quality or lower cost. This pressure is weaker if customers value differences or find switching difficult.

Monopoly

A monopoly 垄断 is a market with only one firm, or one firm that controls most of it. New firms find it hard to enter because of barriers to entry 进入壁垒 — for example, very high start-up costs, or the one firm controlling key supplies.

In a monopoly:

• limited alternatives can give the firm power to raise prices; demand and regulation still limit its decisions.
• there is little pressure to improve quality or cut costs.
• but a large monopoly may gain economies of scale, and may use its profit to pay for research.

Competition versus monopoly

Exam connection: June 2025, 0455/22

Q2(a) asks for two possible merger advantages. Q3(c) asks how division of labour benefits firms. Develop a chain from specialisation to time saved, higher productivity and possible lower unit cost.

Q3(d) asks whether consumers benefit from one shampoo producer. The official scheme supports reasoning on both sides: scale gains may lower prices and profits may finance research; weaker rivalry may raise prices, reduce choice or allow inefficiency. Judge whether savings reach consumers and quality improves. Monopoly does not guarantee high profit or consumer harm.

• For calculations, name the equation, substitute values and give units. Distinguish totals from per-unit figures.
• For explanations, develop a causal chain. For discussions, weigh possible outcomes and judge the conditions that change them.

Vocabulary card meanings

means of deferred payment: A function of money that lets debts be settled later. occupation: The kind of paid work a person does. skill: An ability a worker has built through practice. division of labour: Splitting work so each person specialises in one task. business failure: A firm closing because it cannot continue to trade.

Governments try to manage the whole economy — the macroeconomy 宏观经济. They have five main aims:

1. economic growth 经济增长 — the economy makes more goods and services each year.
2. full employment 充分就业 — almost everyone who wants a job has one, so unemployment 失业 is low.
3. price stability 价格稳定 — prices rise only slowly, so inflation 通货膨胀 is low.
4. balance of payments 国际收支 stability — avoiding persistent external imbalances, including large current-account deficits. It does not mean exports must always equal imports.
5. redistribution of income 收入再分配 — sharing income more fairly, so the gap between rich and poor is not too wide.

These aims can conflict 冲突 (work against each other). For example, fast growth can pull prices up, causing inflation. Cutting unemployment can do the same. So a government must balance its aims.

Fiscal policy 财政政策 means the government changing two things to manage the economy:

• government spending 政府支出 — money the government spends, for example on schools, hospitals, and roads.
• taxation 税收 — money the government takes from people and firms.

The government budget 预算 sets spending against tax. There are three outcomes:

• a budget deficit 预算赤字 — spending is more than the tax raised, so the deficit needs financing, often through borrowing.
• a budget surplus 预算盈余 — the tax raised is more than spending.
• a balanced budget — the two are equal.

Official worked budget: June 2025, 0455/22 Q1(a). Government spending was $310 million and tax revenue$292 million. Budget deficit = spending − tax revenue = $310 million −$292 million = $18 million. This is a one-period shortfall, not accumulated government debt.

Types of tax

Taxes are grouped in two ways. By what is taxed:

• a direct tax 直接税 is paid straight to the government from income 收入 or profit 利润 (income tax, corporation tax).
• an indirect tax 间接税 is added to the price of goods and paid when you spend (a sales tax).

By how the rate changes with income:

• a progressive tax 累进税 takes a bigger % from higher incomes. This helps redistribute income.
• a regressive tax 累退税 takes a smaller % from higher incomes, so it hits the poor harder.
• a proportional tax 比例税 takes the same % from everyone.

Original tax calculation. A earns £10,000 and pays £1,000; B earns £30,000 and pays £6,000. Average tax rate = tax paid ÷ income × 100. A: £1,000 ÷ £10,000 × 100 = 10%. B: £6,000 ÷ £30,000 × 100 = 20%. The average rate rises with income, so this is progressive. Direct/indirect is a separate classification. A fixed spending-tax payment can take a larger income share from a poorer household; indirect does not mean regressive by definition.

What fiscal policy does

To boost the economy (raise growth and jobs), the government can spend more or cut taxes. This raises total demand 需求 — but if demand grows too fast, it can cause inflation.

To slow the economy (fight inflation), the government can spend less or raise taxes. This lowers demand, but can raise unemployment.

Exam reasoning: June 2025, 0455/22 Q4(c). Higher personal income tax can reduce disposable income, then consumer spending, firms' orders and demand for workers. Cyclical unemployment may rise. This chain assumes spending falls and is not offset elsewhere; government use of extra tax revenue also matters.

Monetary policy 货币政策 is the central bank 中央银行 changing interest rates 利率 (and the money supply 货币供给) to manage the economy. The interest rate is the cost of borrowing and the reward for saving.

• Lower interest rates: borrowing is cheaper, which may encourage people and firms to spend and invest 投资 more. Demand rises, potentially increasing output and jobs if there is spare capacity; inflationary pressure may rise.
• Higher interest rates: borrowing is dearer, so spending falls. Demand falls, giving less inflation — but maybe more unemployment.

Supply-side policy 供给侧政策 tries to raise the amount the economy can produce. It improves the quantity and quality of the factors of production 生产要素. Methods include:

• education and training — relevant skills can raise productivity 生产率 when firms can use them.
• privatisation 私有化 — selling state-owned firms to private owners, who may run them better.
• deregulation 放松管制 — removing rules that hold firms back.
• incentives 激励 — lower taxes on income and profit may improve incentives to work and invest; the response varies.

Supply-side policy can raise growth and jobs and lower inflation at the same time. It can take time, costs money and depends on the cause of the constraint; outcomes are not guaranteed.

Original policy comparison. Cutting income tax during weak spending is fiscal policy: more income may be spent, but households may save it. Lowering a policy interest rate is monetary policy: borrowing may be cheaper, but firms with few orders may not invest. Training mechanics for new jobs is supply-side policy: relevant skills may improve employability and capacity, but suitable vacancies must exist. Private ownership alone does not guarantee competition, and education is not the only policy that can improve capacity.

Economic growth is a rise in real GDP.

GDP (gross domestic product 国内生产总值) measures the value of final goods and services produced within a country over a period, usually a year. Counting final output avoids counting inputs again. Real 实际 GDP is GDP after the effect of rising prices is removed, so it shows the true change in output.

Worked example. A country's real GDP was £500 billion last year and £515 billion this year. Find the rate of economic growth.

• economic growth = (515 - 500) ÷ 500 × 100 = 3%.

Because this uses real GDP (with the effect of rising prices taken out), the 3% is a true rise in output, not just higher prices. If prices had risen but output had not, real GDP would be unchanged and its growth rate would be zero; the level of GDP would not be zero.

The business cycle

Real GDP does not rise smoothly. It moves through a business cycle 经济周期 with four stages:

• boom 繁荣 — fast growth; output and jobs are high; pressure on prices may increase if capacity is stretched.
• recession 衰退 — output falls and jobs are lost. (A recession is often defined as falling real GDP for six months.)
• slump 萧条 — the bottom of the cycle; very low output and high unemployment.
• recovery 复苏 — output starts to rise again.

Causes and effects

Growth comes from more or better factors of production: investment in new machines, a bigger or more skilled workforce, and new technology.

Good effects: higher incomes, more jobs, better living standards 生活水平, and more tax for the government to spend.

Bad effects: prices may rise (inflation); the gap between rich and poor may grow; and there may be more pollution and use of scarce resources.

A recession can reduce incomes and employment and increase business failures; the effects differ between groups.

Measuring unemployment

Unemployment is people who can work and want to work, but cannot find a job. There are two ways to measure it:

• the claimant count 失业救济申领人数 — it counts people who claim unemployment benefit 失业救济金. It misses those who want work but cannot claim.
• the labour force survey 劳动力调查 — a survey that counts people who are not working but are looking for work and are ready to start.

The labour force 劳动力 is everyone who is working plus everyone who is unemployed (and looking for work).

Worked example. A country has 24 million people in work and 2 million people who are unemployed and looking for work. Find the labour force and the unemployment rate.

• labour force = 24 + 2 = 26 million.
• unemployment rate = 2 ÷ 26 × 100 = 7.7%.

People with neither a job nor active job search are usually outside the labour force. A student with a paid job is employed; a student who is jobless, searching and available may be unemployed. A falling rate alone does not show that new jobs were created.

Original survey check. Dana is jobless, actively seeking work and available: unemployed. Eli studies full time and neither works nor seeks work: outside the labour force. Farah studies full time and has a paid part-time job: employed. Classify by activity, not the label “student”.

Original rate comparison. From the initial 24 million employed and 2 million unemployed, 0.5 million unemployed people stop seeking work. Employment stays 24 million. New labour force = 24 + 1.5 = 25.5 million. New unemployment rate = 1.5 ÷ 25.5 × 100 = 5.9% (rounded). No new jobs were created, despite the fall from 7.7%. Claimant counts record benefit claims; surveys can include unemployed non-claimants.

Types of unemployment

• frictional unemployment 摩擦性失业 — short-term unemployment between jobs (a worker who just left one job and is looking for the next).
• structural unemployment 结构性失业 — a whole industry shrinks and workers' skills are no longer wanted (for example, coal miners after the mines close).
• cyclical unemployment 周期性失业 — caused by a recession, when total demand is low so firms need fewer workers. (It is also called demand-deficient unemployment.)

Original worker cases. Asha left a job and is searching for another: frictional unemployment; better vacancy information may shorten the search. Ben's factory closed and vacancies need skills he lacks: structural unemployment; relevant retraining may help. Chen lost work because falling spending reduced orders across the economy: cyclical unemployment; demand support may help if spare capacity exists. Choose a policy from the cause; extra spending alone does not give Ben missing skills.

Effects of unemployment

• workers lose income and may lose their skills.
• the country loses the output those workers could have made.
• the government pays more in benefits and collects less in tax.
• crime and poor health may rise.

Sectors and the changing pattern of employment

The economy has three sectors:

• the primary sector 第一产业 extracts raw materials (farming, fishing, mining);
• the secondary sector 第二产业 makes things (manufacturing, construction);
• the tertiary sector 第三产业 provides services (banking, tourism, retail, transport).

A common development pattern is a shift in employment shares primary → secondary → tertiary; it is not inevitable in every economy. Early on most work is farming; industrialisation moves workers into factories; then deindustrialisation 去工业化 and rising incomes grow the service sector, so most jobs end up tertiary. Modern economies also see more part-time and flexible work.

Original sector check. Growing vegetables is primary activity; canning them is secondary; serving them in a museum café is tertiary. Classify the activity, not simply the business name.

Inflation is a rise in the average level of prices over time. The opposite — falling prices — is deflation 通货紧缩.

Measuring inflation

Inflation is measured by the Consumer Prices Index 消费者价格指数 (CPI). We pick a "basket" of goods a typical family buys, give each good a weight 权重 (a bigger weight for things people spend more on), and track how the price of the whole basket changes each year.

Worked example. A country's Consumer Prices Index (CPI) was 100 last year and 104 this year. Find the rate of inflation.

• inflation rate = (104 - 100) ÷ 100 × 100 = 4%.

Prices rose by 4% on average. If next year the index reaches 107, the inflation rate is (107 - 104) ÷ 104 × 100 = 2.9%. Prices are still rising, but more slowly — a smaller inflation rate is not the same as deflation, because for deflation the index itself would have to fall.

Causes

• demand-pull 需求拉动 inflation — total demand grows faster than the economy can supply, so prices are pulled up.
• cost-push 成本推动 inflation — firms' costs rise (wages, materials), so they may raise prices to cover them.

Effects of inflation

• money loses purchasing power 购买力 — each unit of money buys less.
• unchanged money savings lose purchasing power; interest received also matters.
• firms must keep changing prices on labels and lists, which costs time and money.
• if domestic prices rise faster than competitors' and the exchange rate does not offset this, exports may become less competitive.

Deflation

Weaker demand or lower costs can cause deflation; expected falls may delay purchases.

Exam discussion: June 2025, 0455/22 Q1(h). Original A: confidence and spending fall, lowering output and jobs. Fixed debts become harder to repay if income falls. Original B: better technology lowers costs while output rises, potentially improving purchasing power. Judge the cause, affected groups and whether savings reach customers.

Name the equation, use the correct denominator and give units. Explain causal chains; judge causes, constraints and affected groups.

Vocabulary card meanings

macroeconomy: The economy considered as one whole. redistribution of income: Using tax and payments to shift income between groups. regressive tax: A tax that takes a larger fraction of a small income than of a large one. proportional tax: A tax that takes the same fraction of every income. invest: To commit money to assets expected to earn more later. Real: A figure with the effect of rising prices removed. unemployment benefit: State money paid to people who are out of work. deindustrialisation: A shrinking share of factory jobs in the economy. Consumer Prices Index: An index tracking the cost of a typical household basket. purchasing power: The quantity of goods a sum of money can buy.

"Living standards" means how well people live — their income, health, education, and quality of life.

Indicators of living standards

An indicator 指标 is a number we use to measure something. Two indicators of living standards 生活水平 are common.

Real GDP per head is the main one. GDP (gross domestic product 国内生产总值) is the total value of goods and services a country makes in a year. Real 实际 means after rising prices are taken out. Per head 人均 means divided by the number of people. So real GDP per head shows the average output — and roughly the average income 收入 — of each person. Higher real GDP per head usually means higher living standards.

Worked example. A country produces real GDP of £600 billion and has a population of 50 million people. Find its real GDP per head.

• real GDP per head = 600 billion ÷ 50 million = £12,000 per person.

This is only an average. It does not show how the income is shared: the same £12,000 average could hide most people being much poorer while a few are very rich. That is why HDI, below, adds health and education.

The Human Development Index 人类发展指数 (HDI) is a wider measure. It combines three things: income per head, education (years of schooling), and health (measured by life expectancy 预期寿命 — how long people are expected to live). HDI gives a fuller picture than GDP alone.

Limits of the comparison

Comparing living standards is not simple:

• GDP per head is an average. It hides the income distribution 收入分配 — a country can have a high average but a few rich people and many poor people.
• it leaves out unpaid work, and work in the hidden economy.
• it does not measure pollution, free time, or safety.
• prices and money differ between countries, so the same income buys different amounts.

This is why HDI, which adds health and education, is often a better guide.

Poverty 贫困 is when people cannot afford a basic standard of living. There are two types:

• absolute poverty 绝对贫困 — people cannot afford even the basics: enough food, clean water, shelter, and clothing.
• relative poverty 相对贫困 — people are poor compared with others in the same country. They can afford the basics but much less than most people around them.

Causes of poverty

• low income, low wages 工资, or no job (unemployment).
• poor education and poor health, which make it hard to get good work.
• old age, or having many children to support.

Policies to reduce poverty

• economic growth 经济增长 — a growing economy creates jobs and income.
• redistribute 再分配 income — use progressive taxes on the rich to pay for help for the poor.
• a minimum wage 最低工资 — a legal lowest wage, so low-paid workers earn more.
• state benefits 福利 — money paid by the government to the poor, old, or unemployed.
• better state education and healthcare, so the poor can improve their lives.

A country's population 人口 is the number of people living in it. Three things change its size.

• the birth rate 出生率 — the number of births each year for every 1000 people.
• the death rate 死亡率 — the number of deaths each year for every 1000 people.
• migration 移民 — people moving between countries. immigration 迁入 is people moving in; emigration 迁出 is people moving out. Net migration 净移民 is immigration minus emigration.

The population grows when births plus immigration are more than deaths plus emigration.

Worked example. In one year a country has 800,000 births, 500,000 deaths, 300,000 immigrants and 100,000 emigrants. Find the net migration and the total change in population.

• net migration = immigration - emigration = 300,000 - 100,000 = 200,000 (a net gain).
• natural change = births - deaths = 800,000 - 500,000 = 300,000.
• total change = natural change + net migration = 300,000 + 200,000 = 500,000.

So the population grew by 500,000 people that year.

Population structure

The population structure 人口结构 is how the population is split by age and sex. We often draw it as a population pyramid 人口金字塔 — a chart with age groups stacked up, males on one side and females on the other.

An ageing population

In many richer countries the ageing population 人口老龄化 is a big change: people live longer and have fewer children, so the share of old people rises. Effects:

• fewer workers compared with the number of retired people, so each worker must support more people.
• the government spends more on pensions and healthcare.
• it may need higher taxes, or workers from other countries, to fill the gap.

Economic development 经济发展 means a rise in people's well-being, not just more output. We often split the world into developed countries 发达国家 (rich, like Japan or Germany) and developing countries 发展中国家 (poorer, with lower incomes).

Why countries differ

• income — developed countries have much higher income per head.
• productivity 生产率 — developed countries use more capital and skill, so each worker produces more. In many developing countries, farmers do subsistence farming 自给农业 (growing food just for their own family), which produces little to sell.
• population — developing countries often have higher birth rates and younger populations.
• resources, education, and health — better schools, hospitals, and use of resources all raise development.
• debt 债务 — many developing countries owe large amounts of money, and paying it back leaves less for schools and hospitals.
• trade 贸易 — developed countries trade more, and often sell higher-value goods.

How developed and developing countries are linked

The two groups depend on each other. Developing countries sell raw materials and cheap goods to developed countries, and buy machines and skills from them. Trade, aid, and investment from richer countries can help poorer countries develop — but developing countries can also become too dependent on them.

• Real GDP per head = GDP ÷ population, but it is an average that hides how income is shared. HDI adds health and education for a fuller picture.
• A population grows when births + immigration is greater than deaths + emigration. Net migration = immigration − emigration.
• An ageing population means fewer workers for each retired person, so more government spending on pensions and healthcare.
• Distinguish absolute poverty (cannot afford basic needs like food and shelter) from relative poverty (poor compared with others in the same country).

Vocabulary card meanings

redistribute: To shift income or wealth from one group toward another. benefits: State help, often paid in money, for people who qualify. population structure: How a population is divided by age and by other groups. developed countries: Countries with high income and mature industry. developing countries: Countries whose income and industry are still catching up. subsistence farming: Growing food mainly to feed the farmer's own household.

Countries trade 贸易 with each other: they sell some goods and buy others. Just as one worker can focus on one task, a whole country can focus on making the goods it is best at. This is specialisation 专业化 at a national level.

When a country specialises, it sells the goods it makes well (exports 出口) and buys the goods other countries make well (imports 进口).

Free trade

Free trade 自由贸易 means trade between countries with no barriers — no taxes or limits on imports. Its benefits:

• countries can buy some goods more cheaply from abroad than by making them at home.
• consumers get a wider choice of goods.
• firms can sell to bigger markets, so they gain economies of scale.
• more competition makes domestic 国内的 firms (firms in your own country) work harder and improve.

All of this can raise living standards 生活水平: lower prices and more goods for everyone.

Free trade also has disadvantages:

• domestic firms may not be able to compete 竞争 with cheaper foreign goods, so they close. This causes job losses.
• a country can become too dependent 依赖 on other countries for important goods.
• new, small industries may never grow if they face strong foreign rivals from the start.

Globalisation 全球化 is the way the world's economies are becoming more and more joined together — through trade, travel, the internet, and firms working across borders.

Multinational companies

A multinational company 跨国公司 (MNC) is a firm that produces in more than one country — for example, a car maker with factories in several countries. The country an MNC sets up in is the host country 东道国.

• Benefits to the host country: new jobs, investment, new skills and technology, and more tax.
• Drawbacks: profits may flow back to the MNC's home country; local firms may be pushed out; and some MNCs pay low wages or pollute (for example, by sending waste to poorer countries).

Trade protection

Trade protection 贸易保护 is a government putting up barriers to limit imports and protect its own firms. The main methods:

• a tariff 关税 — a tax on imports, which makes them dearer.
• a quota 配额 — a limit on the amount of a good that can be imported.
• a subsidy 补贴 — money paid to domestic firms so they can sell more cheaply than foreign rivals.
• an embargo 禁运 — a total ban on trade in a good, or with a country.

Reasons for protection: to protect jobs; to protect an infant industry 幼稚产业 (a new industry too small to compete yet); to stop dumping 倾销 (foreign firms selling below cost to destroy local rivals); and to raise government revenue from tariffs.

But protection has costs. Prices rise and choice falls for consumers; protected firms stay weak and lazy; and other countries may hit back with their own barriers — a trade war.

The exchange rate 汇率 is the price of one currency 货币 in terms of another — for example, £1 = 1.30 US dollars.

How the rate is set

In a floating exchange rate 浮动汇率 system, the rate is set by the demand 需求 for and supply 供给 of the currency, just like any market.

• if more people want a currency — to buy that country's exports, or to invest there — demand for it rises, so its price (the exchange rate) rises.
• for example, if a country's interest rates rise, foreigners want to save money there, so demand for its currency rises and the rate goes up.

Appreciation and depreciation

• appreciation 升值 — the currency rises in value (it buys more foreign money).
• depreciation 贬值 — the currency falls in value.

A change in the rate changes the price of exports and imports:

• if a currency appreciates (rises), its exports become dearer for foreigners and its imports become cheaper. So exports fall and imports rise.
• if a currency depreciates (falls), its exports become cheaper for foreigners and its imports become dearer. So exports rise and imports fall.

Worked example. The exchange rate is £1 = 1.30 US dollars. (a) A UK firm sells a machine for £2,000 — what is its price to a US buyer? (b) A US laptop costs 650 dollars — what does it cost a UK buyer?

• (a) price in dollars = 2,000 × 1.30 = 2,600 dollars.
• (b) price in pounds = 650 ÷ 1.30 = £500.

To change pounds into dollars you multiply by the rate; to change dollars into pounds you divide. Now suppose the pound appreciates to £1 = 1.50 dollars. The same £2,000 machine then costs a US buyer 2,000 × 1.50 = 3,000 dollars — dearer than before, which is why a stronger pound makes a country's exports harder to sell abroad.

The balance of payments 国际收支 is a record of all the money flowing into and out of a country. Its main part is the current account 经常账户, which has four sections:

• trade in goods 货物贸易 — exports and imports of physical goods (cars, food, oil).
• trade in services 服务贸易 — exports and imports of services (tourism, banking, shipping).
• primary income 初次收入 — wages, interest, and profit earned from abroad.
• secondary income 二次收入 — money sent with nothing given in return, such as aid and gifts.

Deficit and surplus

• a current account deficit 逆差 — more money flows out than in (the country buys more from abroad than it sells).
• a current account surplus 顺差 — more money flows in than out.

Correcting a deficit

A country with a large deficit must borrow money or sell assets to pay for it. To correct a deficit, a government can:

• cut total demand, so people buy fewer imports.
• let the currency depreciate, to make exports cheaper and imports dearer.
• use trade protection (tariffs and quotas) to cut imports.
• use supply-side policy to improve the competitiveness 竞争力 of its firms, so exports rise.

• To convert currency: pounds → dollars, multiply by the rate; dollars → pounds, divide by the rate.
• When a currency appreciates, its exports become dearer and its imports cheaper (so exports fall, imports rise); a depreciation does the opposite.
• Trade protection (tariffs, quotas, subsidies, embargoes) can protect jobs and infant industries, but it raises prices, cuts choice, and can start a trade war.
• A current account deficit means more money flows out than in. It can be reduced by cutting demand, letting the currency depreciate, or improving competitiveness.

Vocabulary card meanings

domestic: Inside the home country rather than abroad. compete: To try to win buyers or resources against rivals. dependent: Relying on another country or another income in order to continue. host country: The country in which a foreign firm operates. embargo: An official ban on trade with a particular country. infant industry: A new home industry still too small to match foreign rivals, whether or not a government shields it. current account deficit: A shortfall on trade in goods and services, primary income, and current transfers, rather than every payment that leaves the country. current account surplus: An excess on trade in goods and services, primary income, and current transfers, rather than every receipt from abroad.