Course Content
Study Resources
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Basic economic ideas and resource allocation
Candidates will explore the fundamental problem that underpins economics and a model highlighting some of the main issues that arise from this problem. They will examine the factors of production, their rewards and the advantages and disadvantages of specialisation in the use of resources. Candidates will assess the different economic systems that are used to allocate scarce resources, considering the strengths and weaknesses of these systems, and they will be introduced to some of the terms and methodology used by economists. The key concepts that are the main focus for this topic are: scarcity and choice; the margin and decision-making; time.
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Scarcity, choice and opportunity cost
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Economic methodology
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Factors of production
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Resource allocation in different economic systems
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Production possibility curves
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Classification of goods and services
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The price system and the microeconomy
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Government microeconomic intervention
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The macroeconomy
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Government macroeconomic intervention
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International economic issues
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CAIE Alevel Economics (AS)
Content

  • Merit goods: goods and services that have positive side effect on third parties
  • Examples: education, healthcare
  • Under-consumption of merit goods is a result of imperfect information in the market.
    • This occurs when individuals lack complete information about the benefits of these goods.
    • As a result, they do not consume enough of these goods to maximize their welfare, and this leads to a market failure.
  • The government steps in to provide these goods to ensure that everyone has access to them and to prevent under-consumption.

  • Demerit goods are goods and services that are considered to have negative effects on individuals and society when consumed in excessive amounts.
  • Examples: tobacco, alcohol, and gambling.
  • Over-consumption of demerit goods is a result of imperfect information in the market.
    • This occurs when individuals do not fully understand the negative consequences of excessive consumption of these goods, or when they face constraints such as addiction or lack of self-control that prevent them from moderating their consumption.
    • As a result, they consume more of these goods than is optimal for their welfare, and this leads to a market failure.
  • The government steps in to regulate the consumption of demerit goods through taxes, restrictions on advertising, and age limits to prevent over-consumption and reduce the negative externalities associated with their consumption.
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