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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

  • PES = percentage change in Quantity Supplied / percentage change in Price

  • The relative percentage changes in price and quantity supplied are used to calculate the PES. It is important to consider the relationship between the changes in price and quantity supplied, as this relationship provides insight into the responsiveness of the quantity supplied to changes in price.
  • Size and Sign of the Coefficient: The size of the PES coefficient indicates the responsiveness of the quantity supplied to changes in price.
    • A value greater than 1 means that the quantity supplied is highly responsive to changes in price, while a value less than 1 means that the quantity supplied is less responsive.
    • The sign of the PES coefficient indicates the direction of the relationship between price and quantity supplied.
      • A positive PES coefficient indicates that the quantity supplied increases as the price increases, while a negative PES coefficient indicates that the quantity supplied decreases as the price increases.

  • (ease and cost to keep) amount of stock
  • excess capacity
  • mobility of factors
  • availability of resources
  • the time period involved

  • If the PES is elastic, firms are able to quickly and easily increase or decrease their supply in response to changes in market conditions, such as changes in price or demand. This means that they can quickly adjust to new market realities and maximize their profits.
  • However, if the PES is inelastic, firms may have difficulty adjusting their supply in response to changes in market conditions. This may lead to a lag in the response of supply to changes in market conditions, and can result in lower profits for firms.
  • It's worth noting that the speed and ease of a firm's reaction to changed market conditions can also depend on other factors, such as the time required to ramp up or scale back production, the cost of increasing or decreasing supply, and the availability of inputs and production techniques.
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