Content
Lesson 1: Introduction to economics, Micro vs. Macro, origin, Scarcity, Opportunity cost, Economics science or art,
assumption behind economic theories and economists’ philosophies, Central Economic problems and PPF - Basics
Only (Page 6-10)
1a: PPF in detail including central economic problems and the shape of PPF/C curve and trade- off and conflicting
objectives, movement and shifting, Apply productive and allocative efficiencies and standard of living on PPF/C.
Free goods and Economic goods, Economic resources- renewable and non-renewable, Economic agents and
objective of firm, individual and government. (Page 13-15)
Lesson 2: Production- 4 FOPs, 2 types of Economic statements, Specialisation, and exchange (productivity) to
address scarcity
In a competitive market- Demand: Meaning, factors affecting, relationship of price and QD, demand curve,
movement and shifting in demand, individual and market demand (Page 18-24)
Lesson 3: In a competitive market- Supply: Meaning, factors affecting, relationship of price and QS, supply curve,
movement and shifting in supply, individual and market supply, Factors affecting demand and supply analysis
Importance of Money, Types of Economies; free- market, command and mixed and Evaluate Capital Economy and
Introduction to free Market Equilibrium in detail with table and graph, Market disequilibrium i.e. excess demand or
excess supply (Page 27-32)
Lesson 4: Market Equilibrium in detail (applied to products, commodity, and labour market) and change in
equilibrium if demand or/and supply change, elimination of disequilibrium of excess demand and excess supply by
market forces, examine question on market equilibrium- MTEC
Link with equilibrium and government intervention to the solution of free market price such as minimum
guaranteed price to producers, maximum price to consumer and buffer stock scheme- Brief only (Detail of Buffer
stock scheme only for OCR Board) (Page 35-41)
Lesson 5: Interrelationship between Markets, Functions of price-mechanism i.e. Signalling, Rationing and
Incentive, Types of demand (joint, competitive, derived demand) and Joint supply and Apply the following
concepts while assessing equilibrium- Consumer surplus, producer surplus, incidence of tax and incidence of
subsidy in detail with understanding of exam style questions. (Page 44-50)
Lesson 6: Introduction to Elasticity: Ped, Yed, Xed and Pes. Ped in detail including calculation, degrees, factors
affecting and business relevance. (Page 53-60)
Lesson 7: Pes and Yed and Xed in detail including factors affecting Pes and with reference to business relevance
and government (tax & subsidy etc.), alternative views of behaviour and production Vs. Productivity. (Page 63-74)
Assessment Week: There will be a lesson based on exam skills and will apply lesson 1-7 in a context. This
lesson is to prepare you to face the challenges of an A Level Economics exam.
Lesson 8: Market Failure: Introduction, causes of market failure, Externalities, MPC, MEC, MSC, MPB, MEB,
MSB (meaning and examples), free market and social optimum equilibrium, causes and consequences of negative
and positive externality and how does externality leads to the market failure, Diagram for positive externality from
consumption and negative externality from production. (Page 77-83)
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,Lesson 9: Test on the diagrams, evaluate externality topic, types of goods (merit and demerit), Public goods, private
goods and Quasi-public goods, types of efficiencies- allocative and productive efficiency, social pareto, dynamic
efficiency and x- inefficiency, the free rider and valuation problems.
Information failure in various markets (asymmetric information about merit and demerit goods) and market failure
due to imperfect knowledge, government intervention to correct the market failure. (Page 86-91)
Lesson 10: Variety of government intervention to correct market failure due to Positive and negative externality
(evaluate all govt. interventions & prepare for essay questions such as state provision, indirect tax, subsidy,
regulation, pollution permits, and information provision etc., Evaluate externality in general, Govt. Failure (Page
94-108) including recap of policies
Stretch & Challenge Notes (Page 10-115)
Condensed Notes (Page 116-122)
Worksheet & A MAGIC STEP (Page 123-137)
Application and further reading for market failure topic:
Understand the impact of externalities and government intervention in various markets, for example, transport,
health care, education, environment, waste disposal and recycling
Government economic measures in various contexts, for example, road pricing, landfill tax, carbon offsetting and
carbon emissions trading, renewable energy certificates.
Apply government intervention and failure; undesirable outcomes from agricultural stabilisation policies;
environmental policies; transport, housing and the national minimum wage (For & against)
NOTE: Remember to attempt lots of Past Papers and read Marks schemes and examiners reports, rather
than only revising the contents, reading books and making posters, spider diagrams and notes. (Knowledge
counts for only less than 40% for the A Level unlike GCSEs)
Following topics are only for the AS AQA and OCR
Note: The following Topics are not included in the main pack, read the additional booklet too.
Lesson 11: (ONLY FOR AQA & NOT FOR OCR): Market failure due to immobility of labour market,
Inequalities in the distribution of income and wealth, unstable commodity market, solutions and evaluation to the
above mentioned market failure.
Introduction to the market structure, discussion about concentration ratio and comparative study of monopoly VS
competitive market leading to the market failure caused by the monopoly market and the government solutions to
control over monopoly market. Non-detailed understanding of the objectives of various market structures
NOTE: AQA needs four diagrams for the externality topic like OCR board but do not need to learn with the
marginal analysis at this stage. (Basic only)
Lesson 11: (ONLY FOR OCR & NOT FOR AQA): Buffer stock scheme diagrammatic analysis and positive and
negative externality 4 diagrams are only needed for the OCR Board only.
Lesson 12: Types of Costs (TC, FC, VC, MC, and AC) and Types of Revenues (TR, MR, and AR) without
diagrams, Economies and Diseconomies of scale in detail i.e. internal and external, brief discussion about
Behavioural Economics
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, 1.1: Introduction to Economics and Introduction to PPF (Page 6-10)
1. Father of Economics:
2. Micro Vs. Macroeconomics:
3. Origin of Economics:
4. Key subject matter of economics:
1.
2.
3.
5. Opportunity cost is
6. List 3 examples of opportunity cost for you to have a lesson:
7. Is Economics science or art?
8. Assumption in economics:
1.
2.
3.
4.
9. Different philosophies of economists:
Adam-Smith:
Karl-Marx
10. Economic central problems:
11. PPF (PPC) is a
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,12. Draw a PPF showing combination of two goods:
12. Capital goods Vs. Consumer goods
13. How to calculate opportunity cost?
14. Methods of production:
1.
2.
15. The best method of production is
16. Any point inside PPF indicates underutilisation as
Points to be noted: My Own Notes
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, Types of Economics
A. Micro Economics B. Macro Economics
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Small & Individual Large/as a whole
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Price Theory Income Theory
Micro Economics:
Who is the father of Economics?
- Adam Smith (1723-1790)
- on the old £20 note
- Book: ‘Wealth of Nation’
Economics (Greek Origin)
Oikos Nemein
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Household To Manage
Allocation of limited resources
Is Economics Science or Art?
Like Art- Economics tackles some complex issues in the real world.
Like Science- Economics has Laws, principles and investigation. (But no testing in Laboratory)
Economics principles, unlike science, are not fixed and rigid. These principles may NOT be applicable always
under all circumstances. To simplify, Economists set some assumptions behind the models. Therefore, Economics
has the features of both arts and sciences, making it a Social Science.
Economics combines elements of both science and art. Economists try to develop analytical mathematical models
which seek to explain economic behaviour in a way that can be theoretically proved. For example, working out the
elasticity of demand through using calculus.
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,Assumptions:
● Rational Consumers- think from brain NOT from the heart
● Perfectly competitive market-many firms in the industry
● Average Consumer-NOT too rich or too poor (Average Income)
● Ceteris Paribus, other things except one being equal/constant. (Assumptions can be used for the
evaluations in the exam questions)
Different Philosophies of Economists-
1. Adam Smith- ‘ Invisible hand theory’
● Free market Economist. Today Smith’s reputation rests on his explanation of how rational
self-interest in a free market economy leads to economic well-being. However, he was not utterly
convinced that a free market economy would be wholly effective (1723-90).
2. Karl Marx (1818-1883) Marx was communism’s most zealous intellectual advocate. Unlike Adam Smith,
Karl Marx is thought of as the father of Communism (opposite-capitalism)
NB: Communism & Capitalism both have their own pros & cons (Refer to the free market/capital economy vs.
planned/command economy)
John Maynard Keynes also believed in Communism & Govt. invention unlike Friedrich Hayek who believed in free
market forces for equilibrium.
Evaluation: All Economists have assumptions behind their economic toolkit & models. However- in practice all
assumptions such as rational behavior, ceteris paribus, Average Customer etc. may not be applicable.
Real Subject Matter:
- Scarcity i.e. limited resources(Demand > Supply)
- Unlimited wants
- Alternate uses of scarce resources -Choice-
Therefore, a decision of allocation has to be made and opportunity cost will occur.
S&C: Let’s apply scarcity on NHS
- Scarcity (limited beds and doctors due to less funding)
- Unlimited wants (operations and treatments)
- Alternate uses of scarce resources (waiting list and priorities)
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,Opportunity Cost is the next best-foregone alternative cost.
Two Choices:
1. One hour sleep OR To attend the most interesting Economics Lesson
If you decide to have an Economics lesson (Good Choice☺) and the opportunity cost is an hour of sleep and where
else you could have spent the money that you had to pay for the lesson e.g. Apps, food or shopping etc.
PPF: Production Possibility Frontier (PPC- Production possibility curve) .i.e. PPF is a curve that shows various
maximum combinations of two goods/services that can be produced with the given scarce resources and technology
at a particular time.
To get X amount of Extra oranges- Opportunity cost is ‘Y’ quantity of apples i.e. the next best-foregone
alternative.
NB: The curve shape indicates the law of diminishing return(less marginal satisfaction by consuming every
additional unit of output)
How to calculate Opp. Cost?
Opportunity cost = Loss/Gain
= 100/150
= 0.66
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,A B
Oranges: Apples Oranges : Apples
500:300 400:450
A: In order to produce 500 Oranges -Opportunity Cost is 300 apples
B: In order to produce 450 Apples – Opportunity Cost is 400 Oranges.
The concept of opportunity cost is also known as marginal analysis: Marginal benefit is the key for the decision, in
other words, additional benefit if you take a decision of consuming one additional unit!
Central Economic Problems:
(i) What to produce & how much to produce:
Capital Goods: Goods, which are used for further production e.g. Machines
Consumer Goods: goods with the end-use/consumption. e.g. Pizza, Coke
NB: It depends on the use of good whether it is categorised as a capital or a consumer good e.g. a laptop can be a
capital or a consumer good.
An economy needs to decide what types of products & how much Quantity of each needs to be produced as this
depends upon the choice of consumers and the availability of resources.
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, (ii) How to produce & how to use as scarce resources efficiently:
Methods:
(i) Capital intensive: use of machinery
(ii) Labour intensive: use of workforce
Either method of production is good as long as the total output is produced on the PPF.
NB: A, B and C: All points on the PPF are productively efficient and indicate the best method of production is used
to get the lowest possible average cost per unit. The maximum level of output that can be produced with the given
resources at a particular time.
Every point on the PPF shows the best method of production and will have maximum possible output combinations
i.e. the change in the method of production can’t increase the output by even one more unit.
D - Shows underutilisation i.e. unemployment means all resources aren’t fully used (D→B there is no opportunity
cost).
Underutilisation (Point D on the PPF) is when output of one good can be increased without decreasing the output of
the other good therefore Zero opportunity cost.
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, 1.1a: Introduction to Economics and PPF (Pg. 13-15)
1. RECAP
Father of Economics:
Micro Vs. Macroeconomics:
Key subject matter of economics:
1.
2.
3.
Opportunity cost is
PPF is
2. PPF & Economic Central problems:
3. Draw a PPF showing on the graph- What and How much and How to produce?
Capital Goods: Consumer Goods
100 : 200
OR
50 : 300
4. Opportunity cost ratio is =
5. Which point on the PPF does show the most productive efficient level?
6. Which point on the PPF does show the most Allocative efficient level?
7. Which point on the PPF does show the higher standard of living?
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