Process
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
Market, planned and mixed economies and allocative and productive efficiency
- 3 things to know
- Component 01
Overview
Recall questions on free market, planned and mixed economies with their advantages and weaknesses, productive and allocative efficiency, and how the profit motive allocates resources.
What you need to know
Answer each one before you reveal it.
Your recallNot started
Evaluation
What is the condition for allocative efficiency in terms of price and marginal cost?
Key term
What is a free market economy?
Questions from this subtopic
Each one with the model answer underneath.
- 1
What is a free market economy?
Model answer
An economy in which resources are privately owned and allocated entirely through the price mechanism by the interaction of demand and supply.
- 2
What is a planned or command economy?
Model answer
An economy in which the state owns the means of production and a central authority decides what is produced, how it is produced and who receives it.
- 3
What is a mixed economy?
Model answer
An economy in which resources are allocated partly by the price mechanism in a private sector and partly by state direction.
- 4
What are two advantages of a market economy?
Model answer
The profit motive gives strong incentives to cut costs and innovate, and consumer spending directs resources towards what people actually want.
- 5
State two disadvantages of a market economy.
Model answer
Public goods are not provided at all and merit goods are under-provided, and income and wealth can become very unequally distributed.
- 6
What are two advantages of a planned economy?
Model answer
The state can supply public and merit goods directly in the quantities it judges best, and it can distribute income far more equally.
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