Economics

Division of Labor (Specialization)

Definition
1. Simple division of labor: a person who specializes in
producing a particular good or service
2. Complex division of labor: a person who specializes in a
sub-process of the production of a good
3. Regional division of labor: a country or region which
specializes in the production of a good
Advantages
1. Increase labor productivity
2. More output is produced from the same quantity of labor
3. The same output is produced with less labor
4. Choosing the best people to do the job
5. Practice makes perfect
6. saving time in training and moving around operations
7. Making full use of capital tools
8. Possibility of mechanization
Disadvantages
1. Work becomes dull and monotonous
2. Greater degree of interdependence
3. Greater risk of unemployment
4. Loss of craftsmanship
5. Standardization of goods

Market and Exchange

Definition
1. A market is any arrangement which enables exchange of
a good or service to take place. For examples, stock
market and flower market.
Components of a Market
1. Buyers
2. Sellers
3. The product/service transacted
4. Product price
5. A market place

Forms of Competition
1. Price competition: by means of price, e.g.: offers
discounts
2. Non-price competition: by means other than price, e.g.:
quality, free gifts or advertisement.
Oligopoly

Definition
1. A few sellers dominating the market
Features
1. Many buyers
2. A few large sellers
3. Free or restricted entry
4. Homogeneous or heterogeneous product
5. Imperfect information
6. Oligopolists are interdependent.
7. Price rigidity
8. Price wars may happen
9. Non-price competition is common

Monopoly

Definition
1. A market with only one seller
Features
1. Only one seller
2. No entry
3. Homogeneous or heterogeneous products
4. Imperfect information
Sources of power
1. Sole ownership of essential resources or techniques.
2. Patent and copyright: Patent is the exclusive rights
given to the inventors of a good. Copyright is the
exclusive right given to the authors to protect
intellectual property right.
3. Government provision.
4. Sole ownership of franchise.
5. Collusion: Firms may act collectively as a monopolist.
6. Natural monopoly

Money and Banking

Money
Definition
1. Money is anything that is generally acceptable
(accepted) as a medium of exchange.
Features
1. Generally acceptable: it can be accepted to settle
payments
2. Divisible: it can settle payments of different amounts
3. Durable: it can reduce damage
4. Portable: it can reduce the cost of carrying
5. Face value: people can recognize the value of the easily
Functions
1. As a medium of exchange that is something accepted by
an economy for the exchange of goods and services
2. As a means of payment that is something accepted by
an economy for settling payments.
Types
1. Commodity money: money which is a commodity itself.
2. Representative money: examples: gold or silver
certificates.
3. Legal tender: Currency declared by the government as
money to be accepted in settling transactions and
debts.
4. Electronic money: money without physical form which is
used to settle payments electronically.
Exchange and Barter
Barter
Definition

1. An exchange in which goods are exchanged directly for

other goods.
Features
1. Requires buying and selling occur at the same time.
2. Difficult for peoples wants to coincide
3. Restricted
Properties of goods which restrict barter
1. Cannot be divided into smaller units for transactions of
small account.
2. Perish easily
3. Not easy to carry a big item to anywhere
4. Different units have different qualities
Commercial Banks and Central Banks
Commercial Banks
Definition
1. A firm that accepts deposits from people and provides
loans to the other people.
Functions
1. Accept deposits:
Banks allow three kinds of deposits:
Demand deposit: It can write a cheque to settle a
huge payment but cant receive any interests.
Saving deposit: It can receive interests. The amounts
can be withdrawn through bankbooks or debit cards.
Time deposit: It can receive higher interests after a
certain fixed period of time.
2. Provide loans: the commercial banks provide loans to
those who lacks money
3. Supplying credit cards
Central Banks
Definition
1. A central bank is the bank of the government.
Functions
1. Being the adviser of the government
2. Supervising the commercial banks

International Trade (Foreign trade)

Definition
1. The exchange of goods and services between countries.
Advantages
1. More variety of goods available for consumers
2. Better quality of goods
3. Closer ties between nations
4. More exchange of technical know-how
5. Increase in employment locally
Imports
Definition
1. Goods and services bought from other
Exports
Definition
1. Goods and services sold to other countries
Types
1. Domestic export
2. Re-export
Domestic export
Definition
1. The products of one place sold to another
Re-export
Definition
1. Products which have been imported into Hong Kong and
which are re-exported without a manufacturing process.

Free Trade
Definition
1. International trade that is not restricted by any barriers
imposed by the government.
Advantages
1. To the importing countries, consumers can enjoy better
quality of goods with cheaper prices.
2. To the exporting countries, producers can export more

goods and enjoy higher incomes.

Disadvantages
1. To the importing countries, producers need to face more
competition and hence get lower incomes.
2. The issue of fair trade need to be addressed as the
farmers of developing countries may be exploited by the
multinational corporations ().
Protectionism
Definition
1. The policy of imposing measures to restrict international
trade so as to protect a countrys interests.
Types
1. Tariff: A tax imposed on imports.
2. Quota: A maximum limit imposed on the quantity of
imports.

Globalization

Definition
1. Globalisation is a process in which time and space
constraints () diminish(). Countries have more
frequent, diverse and important interactions, thus
forming an integrated world ().
Types and Examples
1. Economic Globalisation: credit card, international trade
2. Cultural Globalisation: Hollywood films, fast food culture
3. Political Globalisation: the world solutions on global
warming
Characteristics
1. Reducing time and space constraints:
Better transportation network reduces the time between
places
Information transmits easily through internets
2. Setting up of Multinational Corporation:
Multinational Corporation set up its branches all over the

world. (E.g. Nike, Apple)

People can live or work in other places easily
3. Increasing interaction and exchange:
People in different countries have more chances to
interact with each other
E.g. by Facebook, WhatsApp
4. People in different regions share similar living styles:
Western culture, led by American culture, has great
influence all over the world
E.g. Fast food culture, Hollywood Films
Multinational Corporation
Definition
1. Multinational corporationbuild up crossborder production networks through regional division of
labour.
2. For example, Nike and Apple.