- Markets and the price mechanism
- Students need to know clear distinction between renewable and non-renewable resources. Plus the key roles of the state in a mixed economy
- Functions of the price mechanism (signalling, incentive, rationing functions) often the basis for a question
- Externalities and market failure
- Students only need to know 2 out of 4 externalities diagrams
- External costs of production (MSC>MPC)
- External benefits of consumption (MSB>MPB)
- Also need to know the perceived marginal private benefit curve in cases of information gaps
- Merit and de-merit goods not on the spec
- Students only need to know 2 out of 4 externalities diagrams
- Macroeconomic performance and the economic cycle
- Output gaps – students could be asked to draw output gaps using AD-AS analysis
- The multiplier – could be tested as a calculation e.g. simple formula (k=1/(1-MPC) or 1/marginal propensity to withdraw
- Economic well-being – happiness index is on the spec. Students also need to be precise about terms such as real GDP, GNI, PPP etc when discussing living standards
- Macroeconomic policies
- Students should show awareness of how other countries conduct monetary policy (e.g. different inflation targets, use of QE, managed versus floating exchange rates) + evaluate effectiveness of monetary policy in an international context
- Business economics / imperfect competition / government intervention
- Industry regulation + risk of regulatory capture also important
- Nationalisation is on the spec – arguments for and against to be covered
- No need for PFI to be covered
- 2 firm, 2 price game theory model is required to demonstrate interdependent decision making in an oligopoly / duopoly
- Kinked demand curve – not on the specification
- Monopsony power – no need for a diagram
- Importance of divorce between ownership and control especially with Plcs; roles of activist shareholders
- Objectives – focus on multiple objectives including satisficing, price and output analysis for each, impact on consumer welfare
- Students need to know why some firms remain small
- Labour market economics
- No need to know/cover MRP theory
- But derived demand for labour is important + factors affecting mobility of labour
- Students need strong awareness of current labour market issues
- Labour migration – micro and macro effects
- Ageing population – micro and macro effects
- Automation, robotics, AI – impact on level and pattern of employment
- Trade unions
- Students need strong awareness of current labour market issues
- International macroeconomics
- Global trade imbalances a key aspect of this part of the spec – causes and consequences of persistent trade deficits and surpluses
- Comparative advantage – numerical (table) format fine for showing comparative advantage and/or PPF / trade possibility curves
- Terms of trade – index numbers important – calculating ToT – and understanding the implications of a change in the terms of trade
- Emerging and developing countries
- Significance of capitalism for inequality
- Causes of persistently high levels of relative poverty
- The developmental state – how the state can contribute to / hinder sustainable and inclusive development
- Development strategies – split to market versus interventionist approaches
- Financial sector economics
- Financial regulation needs to be covered – principles of regulation, new roles for central banks, how financial regulation can have micro and macroeconomic effects
- Emphasis likely to be on causes of financial market failure
- Market rigging e.g. LIBOR scandal
- Speculation and market bubbles
- Moral hazard in banking
Synoptic paper technique
- Good practice in the 25 mark questions to explicitly state at the start of a paragraph whether the argument being made is micro or macro
- Paper 3 essays – students need to discuss both micro and macro points to avoid a lack of balance
Common confusion – between
- Competition
- Contestability
- Concentration ratio
Source: Geoff Riley – Tutor2U.