Course Content
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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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The price system and the microeconomy
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Demand and supply curves
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Price elasticity, income elasticity and cross elasticity of demand
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Price elasticity of supply
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The interaction of demand and supply
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Consumer and producer surplus
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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

  • Individual demand: the quantity of a good or service that an individual consumer is willing and able to purchase at a given price, taking into account all the factors that influence their purchasing decision such as income, preferences, and availability.
  • Market demand: the total amount of a good or service that all consumers in a market are willing and able to purchase at a given price. It is the sum of the individual demands for that good or service.

  • Individual supply: the quantity of a good or service that a single seller is willing and able to offer for sale at a given price. It is based on the individual's goals, costs, and expectations.
  • Market supply: the total quantity of a good or service that all sellers in a market are willing and able to offer for sale at a given price. It is the sum of all individual supplies and depends on the price level and market conditions. Market supply curve shows the relationship between the price of a good and the quantity supplied by all producers in the market.

  • Price: The price of a good is the most important determinant of demand. As the price of a good increases, the quantity demanded of that good typically decreases, and vice versa.
  • Income: A consumer's income affects their ability to purchase goods and services. An increase in income will generally lead to an increase in demand for normal goods, while a decrease in income will lead to a decrease in demand.
  • Taste and preferences: Consumers' taste and preferences for a particular good or service will affect their demand for it.
  • Population: The size and demographics of the population can affect the demand for certain goods and services.
  • Expectations: Consumers' expectations about future prices, income, and the economy can influence their demand for goods and services.
  • The price of related goods: The demand for a good can be affected by the price of other goods that are related to it as substitutes or complements.
  • Advertising and promotion: Companies use advertising and promotions to influence consumer demand for their products.

  • Production costs: The cost of inputs such as labor, raw materials, and energy affect the supply of a good or service. If production costs increase, the supply of the good or service will decrease.
  • Technology: Advances in technology can increase the efficiency of production, resulting in an increase in supply.
  • Number of sellers: An increase in the number of firms producing a good will increase the supply of the good.
  • Expectations of future prices: If a producer expects the price of a good to rise in the future, they may increase production today, leading to an increase in supply.
  • Government policies: Government policies, such as taxes, subsidies, and regulations, can affect the supply of a good or service.

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  • A shift in the demand or supply curve occurs when a determinant of demand or supply changes, causing a change in the entire demand or supply curve.
    • A shift in the demand curve to the right represents an increase in demand, while a shift to the left represents a decrease in demand.
    • A shift in the supply curve to the right represents an increase in supply, while a shift to the left represents a decrease in supply.
  • A movement along the demand or supply curve occurs when a change in price causes a change in the quantity demanded or supplied, holding all other determinants of demand or supply constant.
  • In other words, a movement along the demand curve is a result of a change in price, whereas a shift in the demand curve is a result of a change in one of the non-price determinants of demand.
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