Course Content
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.
CAIE Alevel Economics (AS)

  • Evaluate Market Economy
Market economy
Advantages Disadvantages
Efficiency Information failure
Public goods not provided
Consumer sovereignty Merit goods under-consumed
Demerit goods over-consumed
Quick response Negative externalities
Profit incentive Factor immobility results in unemployment
Market power abuse
Maximizes producer and consumer surplus Advertising distortion
Too many consumer goods
Free of government distortion of market incentives Poor lack purchasing power
  • Evaluate Planned Economy
Planned economy
Advantages Disadvantages
Provision of public goods No incentives to control costs or better satisfy consumer wants
Merit goods encouraged, Demerit goods discouraged Low competition, low efficiency, low quality
Full cost-benefit analysis Bureaucracy, slow to respond
Full employment Lack of incentive to work hard or innovate
Wasteful duplication avoided Too much of capital goods
Vulnerable groups protected Lack of consumer sovereignty

  • Transitional economy: is one which is in process of changing from a planned economy to a mixed economy where market forces have greater importance.
  • Issues of transition
    • Rising inflation.
    • Industrial unrest.
    • Fall in output.
    • Rising unemployment.
    • Large trade deficit.
    • Reduction in welfare services.
    • Corruption
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