Candidates must be able to demonstrate apt knowledge of the following topics in the allocation of resources.

TopicCandidates should be able to:
Microeconomics
and
Macroeconomics
.
explain the difference between microeconomics and macroeconomics and the decision
makers involved in each case
The role of
markets in allocating
resources
• analyse how resources are allocated in a market economy
• distinguish between market equilibrium and market disequilibrium
• explain the three economic questions
• analyse the role of the price mechanism in a market system
Demand• define demand
• draw a demand curve and explain movements along a demand curve.
• explain how individual demand is totalled to give market demand
• analyse the causes of shifts in demand curves and draw diagrams to illustrate the shifts
Supply• define supply
• draw a supply curve and explain movements along a supply curve
• explain how individual supply is totalled to give market supply
• analyse the causes of shifts in supply curves and draw diagrams to illustrate the shifts
Price
Determination
• analyse how the interaction of demand and supply determine equilibrium price
• draw demand and supply diagrams to illustrate equilibrium and disequilibrium prices
• interpret demand and supply schedules and curves to identify shortages and surpluses
Price changes• analyse the causes of price changes
• evaluate the effects of changes in demand and supply on equilibrium price and the
quantity bought and sold
• use demand and supply diagrams to illustrate the causes and effects of price changes
Price elasticity of
demand (PED)
• calculate PED using the formula % change in quantity demanded divided by the %
change in price
• interpret PED figures, recognising the difference between perfectly elastic demand,
elastic demand, unit demand elasticity, inelastic demand and perfectly inelastic
demand
• draw and interpret demand curve diagrams to show different PED
• evaluate the key influences on whether demand is elastic or inelastic
• analyse the relationship between PED and total spending on a product/revenue both in
a diagram and as a calculation
• evaluate the implications of PED for decision making by consumers, producers and
government
Price elasticity of
supply (PES)
• define PES
• calculate PES using the formula % change in quantity supplied divided by percentage
change in price
• interpret PES figures, recognising the difference between perfectly elastic supply,
elastic supply, unit supply elasticity, inelastic supply and perfectly inelastic supply
• draw and interpret supply curve diagrams to show different PES
• analyse the key influences on whether supply is elastic or inelastic
• evaluate the implications of PES for decision making by consumers, producers and
government
Market economic
system
• define market economic system
• evaluate the advantages and disadvantages of the market economic system
Market failure• define market failure
• define a public good, a merit good, a demerit good, social benefits, external benefits,
private benefits, social costs, external costs and private costs
• analyse the causes of market failure with respect to public goods, merit and demerit
goods, external costs and benefits, abuse of monopoly power and factor immobility
• evaluate the consequences of market failure
Mixed Economic
System
• define a mixed economic system
• define regulation, privatisation, nationalisation and direct provision of goods
• evaluate maximum and minimum prices in product, labour and foreign exchange
markets
• evaluate the effects of indirect taxes
• evaluate the effects of subsidies

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