1.1 Introduction to Microeconomics
1.1.1 The economic problem
Explain: Economic goods and free goods
Explain: The economic problem: scarcity, choice, needs, and wants
Explain: Normative and positive statements
Explain: The role of economic agents: government, firms, and households
Explain: The factors of production: land, labour, capital, and enterprise
Explain: The rewards of the factors of production: rent, wages, interest and profit
Evaluate: The problem of scarcity and the requirement to make choices
Evaluate: Rationality as a way of understanding the behaviour of economic agents
Evaluate: The different objectives of the economic agents in an economy
1.1.2 The allocation of resources
Explain: Incentives
Explain: Market, planned and mixed economies
Explain: Economic efficiency: productive and allocative efficiency
Evaluate: The effectiveness of incentives on the behaviour of economic agents and resource allocation
Evaluate: The allocation of resources in the different economic systems
1.1.3 Opportunity cost
Explain: Opportunity cost and trade-off
Explain, with the aid of a diagram: Movements along a production possibility curve (PPC)
Explain, with the aid of a diagram: Shifts of a production possibility curve (PPC)
Explain, with the aid of a diagram: The usefulness of the concept of opportunity cost
1.2 The role of markets
1.2.1 Specialisation and trade
Explain: Specialisation and the division of labour
Explain: Barter systems
Explain: Money as a medium of exchange
Evaluate: The role of specialisation and the division of labour in addressing the problem of scarcity
1.2.2 Demand
Explain, with the aid of a diagram: The relationship between price and quantity demanded
Explain, with the aid of a diagram: Individual and market demand
Explain, with the aid of a diagram: Joint, competitive and composite demand
Explain, with the aid of a diagram: Movements along the demand curve (extension/contraction)
Explain, with the aid of a diagram: Shifts of the demand curve (increase/decrease)
1.2.3 Supply
Explain, with the aid of a diagram: The relationship between price and quantity supplied
Explain, with the aid of a diagram: Individual and market supply
Explain, with the aid of a diagram: Joint and competitive supply
Explain, with the aid of a diagram: Movements along the supply curve (extension/contraction)
Explain, with the aid of a diagram: Shifts of the supply curve (increase/decrease)
1.2.4 Consumer and producer surplus
Explain, with the aid of a diagram: Consumer surplus and producer surplus
Explain, with the aid of a diagram: The effects of changes in price on consumer surplus
Explain, with the aid of a diagram: The effects of changes in price on producer surplus
Evaluate: The impact of changes in price on consumer and producer surplus
1.2.5 The interaction of markets
Explain: Ceteris paribus
Explain, with the aid of a diagram: The interaction of demand and supply
Explain, with the aid of a diagram: Market equilibrium and disequilibrium
Evaluate: The impact of changes in demand and/or supply in one market on a related market(s)
1.2.6 Elasticity
Explain: Elasticity
Explain and calculate: Price elasticity of demand (PED)
Explain and calculate: Income elasticity of demand (YED)
Explain and calculate: Cross elasticity of demand (XED)
Explain and calculate: Price elasticity of supply (PES)
Explain, with the aid of a diagram: Different values of PED, YED, XED and PES
Explain, with the aid of a diagram: The relationship between PED and a firm’s total revenue
Evaluate: Factors which determine the value of PED, YED, XED and PES
Evaluate: The usefulness and significance of PED, YED, XED and PES
1.2.7 Market failure and externalities
Explain: Market failure
Explain: Marginal social cost, marginal external cost, marginal private cost, marginal social benefit, marginal external benefit and marginal private benefit
Explain, with the aid of a diagram: Positive and negative externalities (external benefits and external costs); consumption and production
1.2.8 Government intervention
Explain: Government intervention in markets: Taxation, subsidies, government expenditure, price controls, buffer stock systems, public/private partnerships, legislation, regulation, tradable pollution permits, information provision, competition policy
Explain: Government failure
Evaluate: The effectiveness of government intervention
Evaluate: Causes and consequences of government failure
2.1 Aggregate demand and aggregate supply
2.1.1 Circular flow of income
Explain: The circular flow of income, with injections and leakages
Explain: The methods of measuring national income, output and expenditure
2.1.2 Aggregate demand
Explain: Aggregate demand and its components
Explain, with the aid of a diagram: The relationship between aggregate demand and price level
Explain, with the aid of a diagram: Shifts in the aggregate demand curve
Evaluate: The relationship between changes in income and consumption
Evaluate: The role of expectations
2.1.3 Aggregate supply
Explain: Aggregate supply
Explain, with the aid of a diagram: The relationship between aggregate supply and price level in the short run and long run
Explain, with the aid of a diagram: Shifts in the aggregate supply curve in the short run and long run
2.1.4 The interaction of aggregate demand and supply
Explain: The assumptions underlying the aggregate demand and aggregate supply models
Explain: Equilibrium in the macroeconomy
Evaluate: Effects of changes in aggregate demand and aggregate supply on macroeconomic indicators
2.2 Economic policy objectives
2.2.1 Economic growth
Explain: Economic growth
Explain: The policy objective of economic growth
Explain: The different stages of the economic cycle
Explain: Real and nominal Gross Domestic Product (GDP); changes in GDP over time
Explain and calculate: Economic growth rates
Explain and calculate: GDP per capita
Explain, with the aid of a diagram:Short run and long run economic growth
Evaluate: Causes and consequences of economic growth in the short run and long run
2.2.2 Development
Explain: The structure of an economy in terms of primary, secondary and tertiary sectors
Explain: The policy objective of sustainable development
Evaluate: The relationship between economic growth and sustainable development
Evaluate: The usefulness of macroeconomic measures such as GDP, the Human Development Index (HDI) and other alternative social and cultural indicators
2.2.3 Employment
Explain: Employment and unemployment
Explain: The policy objective of full employment
Explain: The labour force survey and claimant count measures of unemployment
Evaluate: Causes and consequences of unemployment
Evaluate: Effects of full employment
2.2.4 Inflation
Explain: Inflation, deflation, disinflation and hyperinflation
Explain: The policy objective of low and stable inflation
Explain: Real and nominal values
Explain: Measuring inflation using the Consumer Prices Index and Retail Prices Index
Explain and calculate: The rate of inflation using index numbers
Evaluate: Causes and consequences of inflation and deflation
2.2.5 Balance of payments
Explain: Balance of payments
Explain: The components of the current account: trade in goods, trade in services, primary and secondary income
Explain: The policy objective of a sustainable balance of payments position
Explain: Imbalances on the balance of payments
Explain and calculate: Balances on the different components on the balance of payments
Evaluate: Causes and consequences of imbalances on the balance of payments
2.2.6 Trends in macroeconomic indicators
Explain: Key trends in UK macroeconomic performance in the last 20 years
Evaluate: The current performance of the UK economy compared with other developed economies, emerging and developing economies
2.3 Implementing policy
2.3.1 Fiscal policy
Explain: Government budget
Explain: Direct, indirect, progressive, proportional and regressive taxation
Explain: Current and capital government expenditure
Explain: Budget surplus, deficit and balanced budget
Explain: Cyclical and structural budget position
Explain: National and government debt
Explain: Discretionary fiscal policy and automatic stabilisers
Explain: Crowding out
Explain: The Laffer curve
Explain and calculate: Average and marginal tax rates
Evaluate: The effectiveness of using fiscal policy to achieve the government’s macroeconomic objectives
2.3.2 Monetary policy
Explain, with the aid of a diagram: Changes in interest rates
Explain, with the aid of a diagram: Changes in money supply
Explain, with the aid of a diagram: Inflation rate targets
Explain, with the aid of a diagram: Quantitative easing
Explain, with the aid of a diagram: Influence of exchange rates
Evaluate: The effectiveness of using monetary policy to achieve the government’s macroeconomic objectives
2.3.3 Supply side policy
Explain, with the aid of a diagram: Privatisation, deregulation and subsidies
Explain, with the aid of a diagram: Competition policy
Explain, with the aid of a diagram: Investment in infrastructure, education, training, research and development
Explain, with the aid of a diagram: Reforms of the tax and benefit system
Explain, with the aid of a diagram: Improved labour market flexibility
Explain, with the aid of a diagram: Immigration control
Evaluate: The effectiveness of using supply side policy measures to achieve the government’s macroeconomic objectives
2.3.4 Policy conflicts
Evaluate: Conflicts and trade-offs between policy objectives
2.4 The global context
2.4.1 International trade
Explain: International trade
Explain: Patterns of international trade over time
Evaluate: Advantages and disadvantages of international trade to developed, emerging and developing countries
2.4.2 Exchange rates
Explain and calculate: Exchange rates
Explain, with the aid of a diagram: Determination of exchange rates in fixed and floating exchange rate systems
Evaluate: Causes and consequences of exchange rate changes
Evaluate: Advantages and disadvantages of different exchange rate systems