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A-LevelAQA

Economics

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Economics as a social science

Individuals, firms, markets and market failure

Positive vs normative statements

Individuals, firms, markets and market failure

Value judgements in economic decision-making

Individuals, firms, markets and market failure

Purpose of economic activity: meeting needs and wants

Individuals, firms, markets and market failure

Three basic economic questions: what, how, for whom

Individuals, firms, markets and market failure

Factors of production: land, labour, capital, enterprise

Individuals, firms, markets and market failure

Curriculum Modules

Economics as a social science Positive vs normative statements Value judgements in economic decision-making Purpose of economic activity: meeting needs and wants Three basic economic questions: what, how, for whom Factors of production: land, labour, capital, enterprise Scarcity, choice and opportunity cost Production possibility frontiers: trade-offs and opportunity cost Productive efficiency vs allocative efficiency on a PPF PPF shifts: growth and changes in resources/technology Unemployment of resources on a PPF

Rational decision-making and economic incentives Total utility and marginal utility Diminishing marginal utility Utility maximisation (marginal analysis)Importance of thinking at the margin Why information matters for consumer decisions Asymmetric information: what it is and why it matters How imperfect information can cause market failure Bounded rationality and bounded self-control Behavioural biases: rules of thumb and anchoring Behavioural biases: availability and social norms Altruism and perceptions of fairness Choice architecture and framing Nudges: how they work and why they’re used Default, restricted and mandated choices

Demand curves: price and quantity demanded Shifts in demand: causes and examples Price elasticity of demand: calculation and interpretation Income elasticity of demand: normal vs inferior goods Cross elasticity of demand: substitutes vs complements Elasticity and total revenue (total expenditure)Factors affecting elasticities of demand Supply curves: price and quantity supplied Shifts in supply: causes and examples Price elasticity of supply: calculation and interpretation Factors affecting price elasticity of supply Market equilibrium: where demand meets supply Disequilibrium: excess demand and excess supply How price changes restore equilibrium Interrelated markets: joint and derived demand Interrelated markets: joint supply and composite demand Tracing knock-on effects across related markets

Turning inputs into outputs: what production means Productivity and labour productivity Specialisation and division of labour: why they raise output Exchange and money as a medium of exchange Short run vs long run in production decisions Marginal, average and total returns The law of diminishing returns Returns to scale: increasing, constant, decreasing Fixed costs vs variable costs Total, average and marginal costs Why cost curves have their shapes How factor prices and productivity shift costs Internal economies of scale: types and examples External economies of scale: types and examples Diseconomies of scale: why they happen Minimum efficient scale and industry implications Total, average and marginal revenue Average revenue as the firm’s demand curve Profit: normal vs abnormal (supernormal)The role of profit in a market economy Invention vs innovation How technological change affects costs and markets Creative destruction linked to technological change

Market structure spectrum: perfect competition to monopoly Market classification: firms, differentiation, entry/exit Firm objectives: profit maximisation and alternatives Profit-maximising rule: MC = MR Divorce of ownership from control: why it happens Satisficing: what it is and why firms might do it Perfect competition: key assumptions Perfect competition short run vs long run outcomes Price takers and the industry supply story Perfect competition as a yardstick for efficiency Monopolistic competition: characteristics Monopolistic competition short run vs long run diagrams Non-price competition in monopolistic competition Oligopoly: characteristics and why markets differ Oligopoly conduct vs structure definitions Concentration ratios: calculation and interpretation Collusive vs non-collusive oligopoly Cooperation vs collusion Kinked demand curve as interdependence illustration Barriers to entry and strategic behaviour in oligopoly Monopoly: diagrammatic model and outcomes Monopoly power: sources (barriers, branding, differentiation)Pros and cons of monopoly Price discrimination: conditions needed Price discrimination: welfare effects on consumers/producers Competition benefits in short run vs long run Creative destruction as a competition process Contestable markets: sunk costs and hit-and-run entry Static efficiency vs dynamic efficiency Productive vs allocative efficiency conditions Consumer and producer surplus (diagram skills)Deadweight and welfare loss (e.g., monopoly)

Derived demand: labour demand depends on product demand Marginal productivity theory of labour demand Shifts in labour demand: causes and examples Elasticity of demand for labour: determinants Monetary and non-monetary factors affecting labour supply Shifts in labour supply: causes and examples Wage determination in competitive labour markets (diagrams)Relative wages: role of market forces Why real-world labour markets are imperfect Monopsony: effects on wages and employment Trade unions: sources of bargaining power Trade unions in competitive vs monopsony markets (diagrams)National Minimum Wage: labour market effects NMW pros and cons (workers, firms, economy)Wage discrimination: conditions needed Discrimination by gender, ethnicity and other factors Evaluating discrimination: efficiency and equity

Income vs wealth: clear distinction Why distributions differ: skills, inheritance and markets Equality vs equity: fairness as a value judgement Lorenz curves: interpretation Gini coefficient: interpretation (no calculation)Benefits and costs of greater equality Benefits and costs of greater inequality Absolute vs relative poverty Causes of poverty: individual, structural, regional Consequences of poverty: economic and social Policies to reduce poverty: transfers and welfare support Policies to reduce poverty: minimum wage and in-work benefits Policies to influence distribution: tax and public spending Evaluating redistribution: efficiency–equity trade-offs

Prices as signals, incentives and rationing devices Strengths and weaknesses of the price mechanism Extending markets into new areas: pros and cons Market failure: misallocation of resources Complete vs partial market failure Public goods: non-rivalry and non-excludability Quasi-public goods and technology impacts Free-rider problem and missing markets Tragedy of the commons and environmental failure Externalities: private vs social costs/benefits Negative externalities: over-production (diagram analysis)Positive externalities: under-production (diagram analysis)Property rights and externalities Merit goods: why they’re under-consumed Demerit goods: why they’re over-consumed Imperfect information as a source of market failure Monopoly power and resource misallocation Factor immobility and persistent market failure Competition policy: aims and broad tools Costs and benefits of competition policy Public ownership: arguments for and against Privatisation: arguments for and against Regulation vs deregulation and regulatory capture Intervention tools: taxes, subsidies, price controls Intervention tools: state provision and regulation Intervention tools: property rights and permits Government failure: how intervention can worsen outcomes Unintended consequences and administrative costs

Macroeconomic objectives: growth, inflation, unemployment, current account Why policy objectives can conflict (short run)How objectives change over time: priorities and trade-offs Core indicators: real GDP and real GDP per capita Inflation indicators: CPI and RPI uses Unemployment measures: what they show and miss Productivity measures and why they matter Current account data: deficits and surpluses Index numbers: base year and weights Reading and interpreting index data in context Using GDP to assess living standards Limits of GDP comparisons across time/countries PPP exchange rates and why they’re used

What national income measures and why it matters Nominal vs real variables and adjustment Circular flow model: households, firms, government, overseas Income = output = expenditure identity Equilibrium income vs full employment income Injections vs withdrawals: what counts as each How injections/withdrawals change national income Aggregate demand: what it is and why it slopes down Shifts in AD: key causes and examples SRAS shifts: costs and productivity LRAS: fundamentals and why it differs Underlying growth as a rightward shift of LRAS Macroeconomic equilibrium on AD/AS diagrams Determinants of C, I and G Determinants of X and M (including exchange rates)Saving vs investment: key distinction Accelerator process: conceptual Multiplier: why spending changes amplify MPC and the multiplier Calculating the multiplier from MPC Keynesian AS curve: implications and use Institutional factors affecting AS: banking and finance

Short-run vs long-run economic growth Demand-side vs supply-side drivers of growth Costs and benefits of growth: people, economy, environment Sustainable growth: meaning and importance Economic cycle: phases and identification Positive vs negative output gaps and implications Shocks and instability: demand vs supply shocks Credit growth, debt and financial fragility Asset price bubbles and destabilising speculation Animal spirits and herding: confidence effects Unemployment: different causes behind one rate Cyclical unemployment and output gap link Supply-side unemployment and LRAS implications Inflation, deflation and disinflation: distinctions Demand-pull vs cost-push inflation Fisher equation MV = PQ and Quantity Theory Expectations and inflation dynamics Consequences of inflation: micro and macro Consequences of deflation: micro and macro Phillips curve: short run Long-run Phillips curve: vertical/L-shaped idea Policy conflicts: inflation, unemployment, growth trade-offs Reconciling objectives: AD/AS policy evaluation

Money: functions and characteristics Narrow vs broad money: definitions and uses Money, capital and foreign exchange markets Why financial markets matter for the real economy Debt vs equity finance for firms Bonds: coupon, maturity and yields Bond prices and interest rates: inverse relationship Commercial vs investment banks: differences Commercial bank balance sheets: assets, liabilities, capital Bank objectives: liquidity, profitability, security Credit creation by banks: conceptual model Central bank functions: Bank of England focus Monetary policy aims and current objectives MPC: role and bank rate decisions MPC factors when setting bank rate Transmission mechanism: rates to spending/inflation Exchange rates and monetary policy effects on AD How the BoE influences money supply growth QE, Funding for Lending and forward guidance Why banks fail: maturity mismatch and liquidity Liquidity and capital ratios: interpretation Moral hazard in financial systems Systemic risk and real-economy spillovers UK regulation: BoE, PRA, FPC, FCA roles

Fiscal policy: spending, taxation and budget balance Fiscal policy’s macro and micro roles Using fiscal policy to shift AD Using fiscal policy to affect AS Public expenditure: types and why it changes Why governments levy taxes: revenue and redistribution Direct vs indirect taxes Progressive, proportional and regressive taxes Principles of taxation: equity and efficiency UK taxes: examples and relative merits Budget balance vs national debt link Cyclical vs structural deficits and surpluses Effects of deficits and surpluses on performance Why national debt size matters (and when)Office for Budget Responsibility: role Evaluating austerity vs stimulus in context Supply-side policies vs supply-side improvements How incentives raise potential output Supply-side effects on unemployment and inflation Supply-side effects on current account performance Free-market supply-side: tax cuts, privatisation, deregulation Interventionist supply-side: education, industrial policy, R&D Micro side-effects of supply-side policy Limits, trade-offs and time lags of supply-side approaches

Globalisation drivers: technology, trade, capital flows Globalisation characteristics in modern economies Effects of globalisation on developed economies Effects of globalisation on developing economies Multinational corporations: roles, benefits and risks Absolute vs comparative advantage Comparative advantage: simple numerical example Gains from trade: specialisation, scale, competition Costs of trade: adjustment, inequality, strategy Why trade patterns change over time (UK focus)Protectionism: tariffs, quotas and subsidies Tariffs: effects on price, output and welfare (diagrams)Why countries use protectionism and consequences Customs unions: key features Single European Market: key characteristics WTO: role in trade rules and disputes Balance of payments: current, capital, financial accounts Current account: goods, services, primary, secondary income Deficit vs surplus: interpretation Current account determinants: productivity, prices, exchange rate Investment flows: FDI vs portfolio investment Policies to correct imbalances: switching vs reducing External-balance policy trade-offs with other objectives Floating exchange rates: supply, demand, determinants Government intervention in FX markets: how and why Fixed vs floating exchange rates: pros and cons Currency unions (eurozone): benefits and costs Economic growth vs economic development Less-developed economies: characteristics Development indicators: HDI and beyond Growth and development factors: investment and human capital Barriers to development: institutions, infrastructure, rights Development policies: market vs interventionist strategies Aid and trade: roles, limits and evaluation

Linking micro and macro: markets into AD/AS outcomes Choosing the right model and stating assumptions Using extracts/data to build a chain of reasoning Evaluation: short vs long run, stakeholders, efficiency vs equity Balanced conclusions with judgement and conditions Case study skills: evidence selection and precise theory use MCQ skills: isolate concepts and eliminate distractors Diagrams in context: accurate labels and narratives Synoptic contexts: environment, inequality, housing, labour Synoptic contexts: instability, global shocks, trade policy

Ratios and fractions in economic data Percentages and percentage change: real vs nominal Mean, median and quantiles Choosing the right graph for data Interpreting line, bar, pie and scatter charts Index numbers: base years and weights Costs, revenues and profits calculations Elasticity calculations and interpretation Converting money to real terms Interpreting mixed written, numerical and graphical evidence

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Economics as a Social Science

Economics as a social science

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