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