Key term
OCR A-Level Economics H460
Introduction to Microeconomics
Topic overviewEconomic and free goods, scarcity and positive and normative statementsEconomic agents and the factors of productionFactor rewards, rationality and the objectives of economic agentsIncentives and the functions of the price mechanismMarket, planned and mixed economies and allocative and productive efficiencyOpportunity cost, trade-offs and the production possibility curveShifts of the production possibility curve and uses of opportunity cost
Microeconomics: The Role of Markets
Topic overviewSpecialisation, the division of labour and barterMoney as a medium of exchange and the gains from specialisationIndividual and market demand and joint, competitive and composite demandMovements along and shifts of the demand curveIndividual and market supply and joint and competitive supplyMovements along and shifts of the supply curveConsumer surplus and producer surplusHow changes in price affect consumer and producer surplusCeteris paribus and market equilibrium and disequilibriumChanges in demand and supply and their effects on related marketsPrice and income elasticity of demand and total revenueCross elasticity, price elasticity of supply and the uses of elasticityMarginal utility, marginal cost and decisions at the marginMarket failure and marginal social cost and benefitPositive and negative production and consumption externalitiesInformation failure, asymmetric information and merit and demerit goodsMerit and demerit good diagrams and correcting information failurePublic, private and quasi-public goodsThe free rider problem and the provision of public goodsIndirect taxes and subsidies to correct market failureState provision, price controls, buffer stocks and legislationRegulation, tradable pollution permits and government failure
Microeconomics: Business Objectives
Topic overviewProfit maximisation and alternative business objectivesCorporate social responsibility and the principal-agent problemFixed, variable, average and marginal costsDiminishing returns and economies and diseconomies of scaleTotal, average and marginal revenueProfit, loss and normal and supernormal profit
Microeconomics: Market Structures
Topic overviewPerfect competition in the short and long run and allocative efficiencyProductive efficiency and perfect competition as a benchmarkMonopoly characteristics, equilibrium and static efficiencyDynamic efficiency, price discrimination and natural monopolyCharacteristics of monopolistic competition and its short run equilibriumLong run equilibrium and efficiency in monopolistic competitionCharacteristics of oligopoly, concentration ratios and the kinked demand curveNon-price competition, collusion and the pros and cons of oligopolyCharacteristics of contestable markets, sunk costs and hit-and-run entryEfficiency, barriers and the limits of contestable markets
Microeconomics: The Labour Market
Topic overviewDerived demand for labour and wage elasticity of demandLabour productivity, unit labour costs and marginal revenue productSupply of labour and wage elasticity of supplyShort and long run labour supply, transfer earnings and economic rentWage differentials, labour mobility and monopsonyTrade unions, bilateral monopoly and the effects of monopsonyWage determination in a competitive labour market and labour market flexibility
Macroeconomics: Aggregate Demand and Aggregate Supply
Topic overviewThe circular flow of income, injections and leakagesMethods of measuring national incomeComponents of aggregate demand and their determinantsThe slope of the aggregate demand curve and what shifts itConsumption, income and the role of expectationsShort run and long run aggregate supply curvesShifts in short run and long run aggregate supplyMacroeconomic equilibrium and the effects of demand and supply shiftsThe national income multiplier and marginal propensitiesThe accelerator, the economic cycle and output gaps
Macroeconomics: Economic Policy Objectives
Topic overviewEconomic growth, real and nominal GDP and GDP per capitaShort and long run growth, the economic cycle and the effects of growthEconomic structure, deindustrialisation and sustainable developmentLimitations of GDP and the Human Development IndexEmployment, unemployment rates and the objective of full employmentMeasures, types and costs of unemployment and the effects of full employmentInflation, deflation, real values and the CPI and RPICalculating inflation with index numbers and its causes and consequencesBalance of payments accounts and current account calculationsCauses and consequences of current account imbalancesKey trends in UK macroeconomic performanceComparing UK performance internationally and the limits of economic dataIncome and wealth, redistribution and absolute and relative povertyLorenz curves, the Gini coefficient and the causes of povertyThe natural rate of unemployment and Keynesian and neo-classical aggregate supplyShort and long run Phillips Curves and their usefulness
Macroeconomics: Implementing Policy
Topic overviewThe government budget, types of tax and the budget balanceNational debt, cyclical and structural deficits and crowding outThe Laffer curve, average and marginal tax rates and limits of fiscal policyInterest rates, the money supply and inflation targetsQuantitative easing, the exchange rate and limits of monetary policyPrivatisation, deregulation and subsidies as supply side policiesCompetition policy, infrastructure, education and tax and benefit reformLabour market flexibility, immigration control and limits of supply side policyConflicts between macroeconomic policy objectives
Macroeconomics: The Global Context
Topic overviewPatterns of international trade and global supply chainsAdvantages and disadvantages of international tradeExchange rate calculations and how exchange rates are determinedExchange rate changes, the Marshall-Lerner condition and exchange rate systemsGlobalisation, international competitiveness and comparative advantageTerms of trade and the impact of globalisation and emerging economiesProtectionism and the effects of a tariffQuotas, trade creation, economic integration and the World Trade Organisation
Macroeconomics: The Financial Sector
Topic overviewFunctions of money, credit creation and narrow and broad moneyThe quantity theory of money and interest rates in the money marketRoles of the financial sector, saving and investmentThe Harrod-Domar model and microfinanceFinancial regulation and the functions of a central bankMonetary policy effectiveness, limits of regulation and the IMF
Quantitative Skills for Economics
Themes in Economics: Synoptic Application
Introduction to Microeconomics
- 7 subtopics
- 21 things to know
- Component 01
What Introduction to Microeconomics covers
Introduction to Microeconomics is examined on component 01 of OCR Economics, Microeconomics. 79 recall questions across 7 subtopics.
Where it is assessed
Component 01
Microeconomics, the whole of the first paper.
Check the OCR specification ↗The 7 subtopics
Each one has its own page.
- Economic and free goods, scarcity and positive and normative statementsRecall questions on economic goods and free goods, scarcity and the basic economic questions, needs and wants, and telling positive statements from normative ones.Open →
- Economic agents and the factors of productionRecall questions on the three economic agents and their roles, the four factors of production, what land and capital include, and what the entrepreneur contributes.Open →
- Factor rewards, rationality and the objectives of economic agentsRecall questions on the rewards earned by each factor of production, profit as a residual reward, rationality and its limits, and the objectives households, firms and government pursue.Open →
- Incentives and the functions of the price mechanismRecall questions on incentives, the signalling, incentive and rationing functions of the price mechanism, financial incentives, perverse incentives and the role of property rights.Open →
- Market, planned and mixed economies and allocative and productive efficiencyRecall questions on free market, planned and mixed economies with their advantages and weaknesses, productive and allocative efficiency, and how the profit motive allocates resources.Open →
- Opportunity cost, trade-offs and the production possibility curveRecall questions on opportunity cost and trade-offs, the axes and concave shape of the production possibility curve, and what points on, inside and outside the curve show.Open →
- Shifts of the production possibility curve and uses of opportunity costRecall questions on movements along and shifts of the production possibility curve, capital versus consumer goods, the slope as opportunity cost, uses of opportunity cost and limitations of the model.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
Is the claim that the government ought to spend more on health than on defence positive or normative?
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Why can an incentive produce the opposite of the behaviour intended?
Process
State two weaknesses of a planned economy.
Process
Why is a production possibility curve usually drawn concave to the origin?
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Name the four factors of production.
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Why is profit described as a residual reward rather than a contractual one?
Evaluation
What is the condition for allocative efficiency in terms of price and marginal cost?
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How does the production possibility curve illustrate the choice between present and future consumption?
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Why is the money price of a good not always the same as its opportunity cost?
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State the economic problem in a single sentence.
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What does the entrepreneur contribute that the other three factors do not?
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What is the signalling function of price?
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Define opportunity cost.
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What is the difference between a need and a want?
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Name the three types of economic agent.
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State the reward earned by each of the four factors of production.
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What is one example of a financial incentive used to change consumer behaviour?
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What is a free market economy?
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What is a trade-off?
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Describe the movement along the curve when a country shifts resources from consumer goods to capital goods.
Take Introduction to Microeconomics further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Positive statement vs Normative statement
Positive statement: a claim about what is, which can be tested against evidence. Normative statement: a claim about what ought to be, resting on a value judgement.
Productive efficiency vs Allocative efficiency
Productive efficiency: producing at the lowest possible average cost, on the boundary of what is attainable. Allocative efficiency: producing the combination of goods that best matches what consumers want.
Free market economy vs Planned economy
Free market economy: an economy in which resources are allocated through prices set by private buyers and sellers. Planned economy: an economy in which the state directs what is produced, how, and for whom.
Questions from this topic
Each one with the model answer underneath.
- 1
What is an economic good?
Model answer
A good that is scarce relative to the demand for it, so using it carries an opportunity cost and it commands a price.
- 2
What makes a good a free good?
Model answer
It is unlimited in supply relative to demand, so consuming a unit of it has no opportunity cost and its price is zero.
- 3
What is an example of a free good, and why is clean air not always one?
Model answer
Sunlight is a free good; clean air stops being free once pollution makes it scarce, because supplying it then uses up resources that have other uses.
- 4
State the economic problem in a single sentence.
Model answer
Human wants are unlimited but the resources available to satisfy them are finite, so choices about how resources are used must be made.
- 5
What is the difference between a need and a want?
Model answer
A need is something required for survival, such as food, water or shelter, while a want is something desired but not essential.
- 6
Why does scarcity force every society to answer three basic questions?
Model answer
Because limited resources cannot meet all wants, society must decide what to produce, how to produce it and for whom it is produced.
What is inside Levo
Six ways to work the same material.
Introduction to Microeconomics revision questions
- What does Introduction to Microeconomics cover in OCR A-Level Economics?
- 7 subtopics: economic and free goods, scarcity and positive and normative statements, economic agents and the factors of production, factor rewards, rationality and the objectives of economic agents, incentives and the functions of the price mechanism, market, planned and mixed economies and allocative and productive efficiency, opportunity cost, trade-offs and the production possibility curve and shifts of the production possibility curve and uses of opportunity cost. Each one has its own page with questions and model answers.
- How is Introduction to Microeconomics organised?
- By the OCR H460 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Introduction to Microeconomics, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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