01Scarcity, Choice and Opportunity Cost
The fundamental economic problem of scarcity · The need to make choices at all levels: individuals, firms and governments · Nature and definition of opportunity cost arising from choices · The basic questions of resource allocation: what, how and for whom to produce …
Economic Methodology
Economics as a social science · Positive and normative statements: facts versus value judgements · Meaning of the term ceteris paribus · Importance of the time period: short run, long run and very long run
Factors of Production
Nature and definition of land, labour, capital and enterprise · Difference between human capital and physical capital · Rewards to the factors of production · Division of labour and specialisation …
Economic Systems
Decision-making in market, planned and mixed economies · Resource allocation in market, planned and mixed economies · Strengths and weaknesses of each economic system · (Legacy) - Problems of transition when central planning in an economy is reduced
Production Possibility Curves
Nature and meaning of a production possibility curve (PPC) · Shape of the PPC: constant and increasing opportunity cost · Causes and consequences of shifts in a PPC · Significance of a position within a PPC
Classification of Goods and Services
Free goods and private goods (economic goods) · Public goods: non-rivalry, non-excludability and the free-rider problem · Merit goods and under-consumption caused by imperfect information · Demerit goods and over-consumption caused by imperfect information
(Legacy) - Money
Functions of money in a modern economy · Characteristics of money · Barter and the coincidence of wants · Cash, bank deposits, cheques and near money …
Demand and Supply
Effective demand · Individual and market demand and supply · Determinants of demand · Determinants of supply …
Elasticities of Demand
Definitions of price, income and cross elasticity of demand (PED, YED, XED) · Formulae for and calculation of PED, YED and XED · Significance of the size and sign of each coefficient · Descriptions of elasticity values from perfectly elastic to perfectly inelastic …
Price Elasticity of Supply
Definition of price elasticity of supply (PES) · Formula for and calculation of PES · Significance of the size and sign of the PES coefficient · Factors affecting price elasticity of supply …
Market Equilibrium and the Price Mechanism
Definition of market equilibrium and disequilibrium · Effects of shifts in demand and supply on equilibrium price and quantity · (Legacy) - Applications of demand and supply analysis · Relationships between markets: joint demand, alternative demand, derived demand and joint supply …
Consumer and Producer Surplus
Meaning and significance of consumer surplus · Meaning and significance of producer surplus · Causes of changes in consumer and producer surplus · Significance of price elasticity of demand and supply in determining the extent of these changes
(Legacy) - Externalities and Cost-Benefit Analysis
Positive and negative externalities · Social costs as the sum of private costs and external costs · Social benefits as the sum of private benefits and external benefits · Decision making using cost-benefit analysis
Reasons for Government Intervention in Markets
Addressing the non-provision of public goods · Addressing over-consumption of demerit goods and under-consumption of merit goods · Controlling prices in markets
Methods of Government Intervention in Markets
Impact and incidence of specific indirect taxes · (Legacy) - Specific and ad valorem taxes · Impact and incidence of subsidies · Direct provision of goods and services …
Income and Wealth Inequality
Income as a flow concept and wealth as a stock concept · Measuring inequality: Gini coefficient (calculation not required) · Economic reasons for inequality of income and wealth · Policies to redistribute income and wealth: minimum wage and transfer payments …
National Income Statistics
Meaning of national income · Measurement using Gross Domestic Product (GDP), Gross National Income (GNI) and Net National Income (NNI) · Adjustment of measures from market prices to basic prices · Adjustment of measures from gross values to net values
The Circular Flow of Income
Circular flow of income in a closed economy and an open economy · Flows between households, firms, government and the international economy · Injections and leakages (multiplier not required) · Equilibrium and disequilibrium in the circular flow
Aggregate Demand and Aggregate Supply
Definition of Aggregate Demand and its components: AD = C + I + G + (X - M) · Determinants of AD and the downward-sloping shape of the AD curve · Causes of a shift in the AD curve · Definition and determinants of Aggregate Supply …
Economic Growth
Meaning and measurement of economic growth · Distinction between growth in nominal GDP and real GDP · Causes of economic growth · Consequences of economic growth
Unemployment
Meaning of unemployment · (Legacy) - Size and components of the labour force; labour productivity · Measures of unemployment and difficulties in measurement · Types of unemployment: frictional, structural, cyclical, seasonal and technological …
Price Stability
Definition of inflation, deflation and disinflation · (Legacy) - Degrees and types of inflation · Measurement of price changes using the consumer price index (CPI) · (Legacy) - General price level measured by other price indices …
Fiscal Policy
Government macroeconomic policy objectives: price stability, low unemployment and economic growth · Government budget: distinction between a budget deficit and a budget surplus · Meaning and significance of the national debt · Types of tax: direct and indirect; progressive, regressive and proportional …
Monetary Policy
Definition of monetary policy · Tools of monetary policy: interest rates, money supply and credit regulations · Distinction between expansionary and contractionary monetary policy · AD/AS analysis of the impact of monetary policy on national income, output, prices and employment
Supply-Side Policy
Meaning of supply-side policy in terms of its effect on the LRAS curve · Objectives of supply-side policy: increasing productivity and productive capacity · Tools of supply-side policy: training, infrastructure and support for technological improvement · AD/AS analysis of the impact of supply-side policy on national income, output, prices and employment
International Trade and Comparative Advantage
Distinction between absolute and comparative advantage · Benefits of specialisation and free trade, including the trading possibility curve · (Legacy) - Other explanations and determinants of trade flows · (Legacy) - Opportunity cost applied to trade …
Protectionism
Meaning of protectionism in the context of international trade · Tariffs and import quotas, and their impact · Export subsidies and embargoes, and their impact · (Legacy) - Voluntary export restraints (VERs) …
(Legacy) - Economic Integration
Free trade area, customs union, monetary union and full economic union · Trade creation and trade diversion
Balance of Payments
Components of the current account: trade in goods, trade in services, primary income and secondary income · (Legacy) - Components of the balance of payments accounts: capital and financial account, and the balancing item · Definition of balance, deficit and surplus on the current account · Calculation of the balance of trade in goods, in services, and the current account balance …
Exchange Rates
Definition of an exchange rate · (Legacy) - Nominal, real and trade-weighted exchange rates · Determination of a floating exchange rate · (Legacy) - Fixed and managed float exchange rate systems …