A Level Economics

An individual will make choices about education, work and spending money which will be based on economic principles. A business will make decisions when producing goods and setting price structures in competitive markets. This again will be based on economic decisions. Something that influences everyday decision-making is scarcity and the economic problem. A government becomes accountable when a market fails to deliver efficient or fair outcomes. Governments must intervene on issues such as unemployment, inequality and access to goods or services. In this topic, you will cover:

• The economic problem and economic methodology
• Individual economic decision making
• Price determination in a competitive market
• Production, costs and revenue
• Perfect competition, imperfectly competitive markets and monopoly
• The labour market
• The distribution of income and wealth: poverty and inequality
• The market mechanism, market failure and government intervention in markets

Both the national and international economy have an impact on events such as job security, income and living standards. Macroeconomic factors will be considered and how performance can affect inflation, unemployment and growth. You will also look into government decisions on fiscal policy, supply-side policies, interest rates, borrowing and investment. Here is what you will cover in this topic:

• The measurement of macroeconomic performance
• How the macroeconomy works : the circular flow of income, AD/AS analysis, and related concepts
• Economic performance
• Financial markets and monetary policy
• Fiscal policy and supply-side policies
• The international economy

• Economic methodology and the economic problem
• Price determination in a competitive market
• Production, costs and revenue
• Competitive and concentrated markets
• The market mechanism, market failure and government intervention in markets

• The measurement of macroeconomic performance
• How the macroeconomy works : the circular flow of income, AD/AS analysis, and related concepts
• Economic performance
• Macroeconomic policy

People, businesses and governments must make decisions on how resources are distributed. Allocating money, time, land and labour to produce goods and services is known as resource allocation. In this topic, you will cover:

• Scarcity, choice and opportunity cost
• Economic methodology
• Factors of production
• Resource allocation in different economic systems
• Production possibility curves
• Classification of goods and services

The price system allows us to determine what to produce, how to produce and for whom to produce through demand and supply. In this topic, you will cover:

• Demand and supply curves
• Price elasticity, income elasticity and cross elasticity of demand
• Price elasticity of supply
• The interaction of demand and supply
• Consumer and producer surplus

Sometimes the government will intervene in individual markets to try to improve the economy. For example, they may increase tax on cigarettes. This increases the price to the customer but also reduces demand. In this topic, you will cover:

• Reasons for government intervention in markets
• Methods and effects of government intervention in markets
• Addressing income and wealth inequality

For this topic you will look at the economy as a whole rather than individual markets. You will gain an understanding of the following:

• National income statistics
• Introduction to the circular flow of income
• Aggregate Demand and Aggregate Supply analysis
• Economic growth
• Unemployment
• Price stability

Macroeconomic intervention influences the whole economy and is implemented by the government to support economic growth, unemployment, inflation and income distribution. Policies are put in place to help keep the economy stable and for it to grow.

• Government macroeconomic policy objectives
• Fiscal policy
• Monetary policy
• Supply-side policy

Countries will trade with each other as no country can produce everything it needs efficiently. This topic will look at how countries exchange through trade, exchange rates and balance of payments.

• The reasons for international trade
• Protectionism
• Current account of the balance of payments
• Exchange rates
• Policies to correct imbalances in the current account of the balance of payments

• Utility
• Indifference curves and budget lines
• Efficiency and market failure
• Private costs and benefits, externalities and social costs and benefits
• Types of cost, revenue and profit, short-run and long-run production
• Different market structures
• Growth and survival of firms
• Differing objectives and policies of firms

• Government policies to achieve efficient resource allocation and correct market failure
• Equity and redistribution of income and wealth
• Labour market forces and government intervention

• The circular flow of income
• Economic growth and sustainability
• Employment/unemployment
• Money and banking

• Government macroeconomic policy objectives
• Links between macroeconomic problems and their interrelatedness
• Effectiveness of policy options to meet all macroeconomic objectives

• Policies to correct disequilibrium in the balance of payments
• Exchange rates
• Economic development
• Characteristics of countries at different levels of development
• Relationship between countries at different levels of development
• Globalisation

1.3.1 Introductory concepts This topic helps us to understand how individuals, businesses and governments allocate limited resources. The topics will help us develop an understanding of everyday life such as prices, jobs and how we spend and save money.

• 1 The nature of economics
• 2 Positive and normative economics
• 3 Scarcity
• 4 Production possibility frontiers
• 5 Specialisation and the role of money and financial markets
• 6 Free market, mixed and command economies

1.3.2 Consumer behaviour and demand This topic will focus on consumers and how they make choices due to demand within the market. It will allow us to understand how everyday decisions are made for example, how people respond to price changes, sales or changes in income.

• 1 Rational decision making
• 2 The demand curve
• 3 Price, income and cross-elasticities of demand

1.3.3 Supply The supply curve helps us understand the relationship between price and the quantity producers are willing to sell. This topic will help us understand real-life situations and why some products increase in supply quickly when prices go up, whilst others take more time to adjust.

• 1 The supply curve
• 2 Price elasticity of supply

1.3.4 Price determination This topic will look at the stability of prices and how they are set through market equilibrium. The price mechanism will tell us how to allocate resources by signalling when to produce more or less of a good. Taxes such as VAT can also have an increase on prices which in turn can reduce demand. These factors explain how prices affect what we buy, sell and produce in everyday life.

• 1 Determination of market equilibrium
• 2 Consumer and producer surplus
• 3 Functions of the price mechanism
• 4 Indirect taxes and subsidies

1.3.5 Market failure This topic will consider situations where markets don’t work efficiently. This can happen due to external factors or products not being profitable. It can also be caused be misinformation where people don’t know all the facts to make good decisions. This is all known as market failure.

• 1 Sources of market failure
• 2 Positive and negative externalities
• 3 Non-provision of public goods
• 4 Imperfect market information
• 5 Moral hazard
• 6 Speculation and market bubbles

1.3.6 Government intervention in markets Sometimes the government will step in to help fix problems like market failure, inequality and provide public goods. They may also need to protect customers. Government intervention can include taxes, subsidies, regulations and spending. Sometimes, these actions still don’t help markets and government failure can occur.

• 1 Purpose and methods of government intervention
• 2 Government failure

2.3.1 Measures of economic performance A country’s economic performance can be measured through growth, inflation, employment and unemployment. The balance of payments records a country’s trade and financial transactions with the rest of the world. All these indicators help us understand how well an economy is doing and how it affects things such as job opportunities, wages and the cost of living.

• 1 Economic growth
• 2 Inflation
• 3 Employment and unemployment
• 4 Balance of payments

2.3.2 Aggregate demand (AD) Aggregate demand is made up of consumption (spending by households), investment (spending by businesses), government expenditure, and net trade (exports minus imports). These show where demand in the economy comes from and how it changes. AD helps us to understand changes in economic activity such as growth, recessions and how spending affects jobs.

• 1 The characteristics of AD
• 2 Consumption (C)
• 3 Investment (I)
• 4 Government expenditure (G)
• 5 Net trade balance (X−M)

2.3.3 Aggregate supply (AS) Aggregate supply is the total output of goods and services that an economy can produce. Short-run aggregate supply (SRAS) is where output can change due to factors like costs and wages. Long-run aggregate supply (LRAS) shows the economy’s maximum productive capacity. AS helps us to understand how economics grow, why production increases or decreases and living standards.

• 1 The characteristics of AS
• 2 Short-run AS (SRAS)
• 3 Long-run AS (LRAS)

2.3.4 National income National income is the total value of goods and services produced within an economy. The equilibrium level of real output shows us where total spending equals total output and in turn, creates stability.

• 1 National income
• 2 Injections and withdrawals
• 3 Equilibrium level of real output
• 4 The multiplier

2.3.5 Economic growth Economic growth is the increase in a country’s output over a certain amount of time. It will explore causes of growth such as investment, better technology and an increased workforce. It will also consider benefits such as higher living standards and more jobs. Output gaps indicate whether an economy is underperforming be showing the difference between actual and potential output. These ideas help to explain how growth affects people’s quality of life and the overall health of the economy.

• 1 Causes of growth
• 2 Benefits of growth
• 3 Costs of growth
• 4 Output gaps

2.3.6 Macroeconomic objectives and policies This topic will look at goals and tools of macroeconomic policy. Macroeconomics studies the economy as a whole rather than individuals. The unit will focus on how households, businesses and governments interact to determine the overall health and growth of the economy.

• 1 Macroeconomic objectives
• 2 Possible conflicts between macroeconomic objectives
• 3 Macroeconomic supply-side policies
• 4 Macroeconomic demand-side policies

3.3.1 Types and sizes of businesses Types of businesses will look at sole traders, partnerships and companies. You will consider the different types of ownership along with their responsibilities. When establishing the size of a business, we can look at the number of employees, sales or market share. Finally, you will look at objectives such as making a profit or providing a service.

• 1 Types of business
• 2 Size of businesses
• 3 Business objectives

3.3.2 Revenue, costs and profits This topic will look into how a business will earn and spend its money. Revenue is generally the money taken into a business through selling a good or a service. Costs are the expenses that go out in order to run the business such as materials, labour and utilities. When costs are deducted from sales, a business is left with a profit provided the costs are not higher than the revenue.

• 1 Revenue
• 2 Costs
• 3 Economies and diseconomies of scale
• 4 Profits and losses

3.3.3 Market structures and contestability This topic will investigate different market structures and how factors affect them. For example, efficiency tells us how well resources are used and concentration ratio measures how much of the market is controlled by the largest firms.

• 1 Efficiency
• 2 Concentration ratio
• 3 Perfect competition
• 4 Monopolistic competition
• 5 Oligopoly
• 6 Monopoly
• 7 Monopsony
• 8 Contestability

3.3.4 Labour markets This topic will look into the demand for labour which usually occurs when firms are more profitable. It will investigate the supply of labour which can be influenced by wage rates, skills, working conditions and taxes. Overall, the topic should allow you to analyse how wages are decided, why some workers earn more and why labour markets don’t always work efficiently.

• 1 The demand for labour
• 2 The supply of labour
• 3 The determination of wage rates in competitive and non-competitive markets
• 4 Market failure in the labour market

3.3.5 Government intervention Governments get involved to help correct market failure, improve fairness and promote efficiency. Whilst governments introduce new policies to correct problems, this can also have a downside. Intervention can sometimes lead to government failure or unintended consequences.

• 1 Government intervention in product markets
• 2 Government intervention in labour markets

4.3.1 Causes and effects of globalisation Economies around the world connect through trade, investment and movement of labour. Globalisation explains how the world economy has become increasingly connected, why the process has happened and the trade-offs involved.

• 1 Characteristics of globalisation
• 2 Causes of globalisation
• 3 Effects of globalisation

4.3.2 Trade and the global economy This topic looks into how countries benefit from trading, how global trade is structured and why governments sometimes support or restrict trade.

• 1 Specialisation and comparative advantage
• 2 Patterns and volume of world trade
• 3 Terms of trade
• 4 Trade liberalisation and trading blocs
• 5 Restrictions on free trade

4.3.3 Balance of payments, exchange rates and international competitiveness The balance of payments records all financial transactions between a country and the rest of the world. This topic will show you how exchange rates influence how expensive or cheap trade is and competitiveness determines long-term success in global markets.

• 1 Balance of payments
• 2 Exchange rates
• 3 International competitiveness

4.3.4 Poverty and inequality This topic will study why some individuals and countries are poorer than others along with why income and wealth are unevenly distributed. You will also consider the economic and social consequences of these issues.

• 1 Poverty
• 2 Inequality

4.3.5 The role of the state in the macroeconomy This topic will consider how governments manage the economy and the trade-offs between growth, inflation and debt. It will also look into the policy decisions in economic stability.

• 1 Public expenditure
• 2 Taxation
• 3 Public sector borrowing and public sector debt
• 4 Macroeconomic policies

4.3.6 Growth and development in developing, emerging and developed economies This topic will consider why one country is at a different stage of development to another. It will also look into the challenges poorer countries face and what can be done to improve living standards.

• 1 Measures of economic development
• 2 Constraints on growth and development
• 3 Measures to promote growth and development