Revision: Economics at a glance

You have worked through fifteen modules – from the question ‘Why can't you have everything?’ to debt traps in online shops. Before the written assessment, this module brings it all together: no new material, just the essentials from all three topic areas, summarised for you to revisit – followed by plenty of practice, practice, practice.

Here is how to get the most out of this module:

1. Read the three topic summaries and mark any terms that no longer feel familiar.
2. Complete the big quiz – it starts off easy and gets more challenging towards the end.
3. Work through the matching exercise and the gap-fills. Revisit the relevant module for anything you find difficult.
4. Use the final task to plan exactly what you still need to work on before the assessment.

You can repeat all the tasks as often as you like – your best result counts. Just what you need for revision week.

Economic activity arises because unlimited needs meet limited resources. Using these scarce resources wisely is the economic principle (achieving as much as possible with the resources available – or reaching a goal with as few resources as possible). Needs range from basic needs through cultural needs to luxury needs, and they are met by goods: physical goods and services, free goods and scarce goods. The three economic actors are households (which consume and supply labour), businesses (which produce and pay wages) and the state (which sets rules, collects taxes and provides public services). The circular flow of the economy shows the exchanges between them: the green real flow (labour and goods) and the orange money flow (wages and consumer spending) move in opposite directions. The extended model adds the state, banks (saving and loans) and the foreign sector (exports and imports). Work takes place in three sectors – agriculture, industry and services – and structural change has shifted employment over time from the first to the second and then to the third sector. Liechtenstein is a special case, with unusually strong industry and a strong service sector.

In a market, supply and demand meet. The rule is: the higher the price, the less is demanded – and the more is supplied. If the price falls, the reverse happens. Where the two sides meet is the equilibrium price: the quantity supplied matches the quantity demanded, and the market ‘clears’. Prices are therefore the market's most important signal – they indicate scarcity, attract new suppliers and curb demand. For this to work, there needs to be competition: competing suppliers put downward pressure on prices and drive up quality. In a monopoly, by contrast, there is only one supplier and customers cannot go elsewhere – which is why the authorities keep a closer eye on such markets. Whether the state should intervene in prices (rent controls or price caps) is a political debate: a cap below the equilibrium price protects those affected in the short term but creates shortages – and a good argument about this always consists of a claim, a reason and an example.

Money has three functions – medium of exchange, store of value and unit of account – and has developed from barter through commodity money, coins and paper money to bank money and digital payments. Liechtenstein has used the stable Swiss franc since 1924 (currency treaty with Schweiz signed in 1980). Insurance is based on the group bearing the individual's risk – the premium is the price paid for this. The rules of thumb are: insure against risks that could threaten your financial security, cover small losses yourself, and keep insurance and saving separate. Banks accept deposits, provide loans and process payments. They earn money from the interest rate spread between lending and savings rates, and check creditworthiness before granting any loan. On the stock exchange, supply and demand determine prices: a share is a stake in a real business, whereas nothing tangible backs Bitcoin. The general rule is: higher potential returns, higher risk. Managing your own money comes down to practical skills: gross pay minus deductions equals net pay. Base your budget on your net pay and follow the rule ‘save first, spend second’. If you know about debt traps such as buy now, pay later, subscription traps and small consumer loans, you can spot warning signs early and know where to get help.