The Unit 1 Exam is worth 15% of the whole year’s final score… Here is the checklist :O
Introduction to Economics
- Explain the concept of Economics
- Distinguish between microeconomics and macroeconomics
- Describe the economic decision-making process
- Discuss the importance of economic models
- Demonstrate and explain the Production Possibility Frontier (PPF) Model
- Discuss the characteristics of a market economy
Demand
- Define the law of demand
- Explain the relationship between individual and market demand schedules and curves
- Demonstrate and explain the effect of changes in price on quantity demanded, ie movement along the curve
- Discuss the non-price factors affecting demand
- Income ie effect on normal and inferior goods
- Population
- Tastes and preferences
- Prices of substitutes and complements
- Expected future prices
- Demonstrate and explain the effect of changes in non-price factors on demand, ie increase or decrease in demand
Supply
- Define the law of supply
- Explain the relationship between individual and market supply schedules and curves
- Demonstrate and explain the effects of changes on quantity supplied, i.e. movement along the curve
- Discuss the non-price factors affecting supply
- costs of production
- factors of production
- expected future prices
- number of suppliers
- technology
- Demonstrate and explain the effect of changes in non-price factors on supply i.e. increase or decrease in supply
Equilibrium
- Outline the concept of market equilibrium
- Explain the concepts of market clearing, shortages and surpluses
- Explain the effects of changes in demand and / or supply on market equilibrium, including simultaneous shifts of demand and supply
Elasticity
- Define the concept, and measurement, of price elasticity of demand
- Explain the determinants of price elasticity of demand
- Distinguish between goods that are price elastic and price inelastic in demand
- Demonstrate and describe the link between price elasticity of demand and total revenue
- Define the concept of price elasticity of supply
- Distinguish between goods that are price elastic and price inelastic in supply
- Explain the determinants of price elasticity of supply
- Discuss the application of price elasticity of demand and supply to markets
- Analyse the importance of price elasticity of demand and supply for business and government, including the incidence of a tax and price discrimination
Market Efficiency
- Outline the concept of market efficiency in a perfectly competitive market
- Explain the concepts of consumer surplus, producer surplus, total surplus and deadweight loss
- Outline the efficiency of market equilibrium i.e. maximising total surplus
- Discuss how under- and overproduction in a market can result in a deadweight loss
- Demonstrate and explain the effects of a tax and subsidy on a market
- Demonstrate and explain the effects of a price ceiling and price floor on a market
Market Failure
- Define the concept of market failure
Externalities
- Explain the concept of externalities, ie positive and negative externalities
- Explain the influence of externalities on market efficiency, ie a deadweight loss
- Discuss the policy options to correct for externalities, including the use of taxes and subsidies
Public Goods and Common Resources
- Outline the classification of goods, ie based on rivalry and excludability
- Describe the public goods and the free rider effect
- Describe common resources and the tragedy of the commons
- Discuss the policy options to reduce market failure associated with public goods and common resources
Market Power
- Outline the characteristics of an imperfectly competitive market.
- Explain the concept and causes of market power
- Explain how market power can influence market efficiency, ie a deadweight loss
- Discuss the policy options to influence market power, including regulation/deregulation and legislation