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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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Government microeconomic intervention
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The macroeconomy
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National income statistics
00:00
Introduction to the circular flow of income
00:00
Aggregate Demand and Aggregate Supply analysis
00:00
Economic growth
00:00
Unemployment
00:00
Price stability
00:00
Government macroeconomic intervention
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International economic issues
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CAIE Alevel Economics (AS)
Content

  • The claimant count measure is a measure of unemployment based on the number of people claiming unemployment benefits.
    • This method provides a quick and reliable estimate of unemployment, as the data is collected and processed on a regular basis.
    • However, the claimant count measure has several limitations,
      • not all unemployed people are eligible for unemployment benefits and some people who are eligible choose not to claim them.
      • the claimant count measure only provides information on those who are unemployed and claiming benefits, and does not provide information on those who are unemployed and not claiming benefits.
  • The labour force survey measure is a measure of unemployment based on a sample survey of households.
    • This method provides a more comprehensive estimate of unemployment, as it covers both employed and unemployed individuals and takes into account those who are not eligible for unemployment benefits.
    • The labour force survey measure is conducted regularly and provides detailed information on employment and unemployment, including information on the duration of unemployment, the reasons for unemployment, and the occupation and industry of the unemployed.
    • The labour force survey measure has some limitations, as the sample survey is subject to sampling error and the results may be subject to revision as more data becomes available.
      • Sampling error: the people being surveyed having different characteristics or experiences to the rest of the population.

  • Frictional Unemployment: unemployment that is temporary and arises when workers are in-between jobs.
    • Voluntary unemployment: unemployment resulting from the unemployed choosing not to accept jobs at the going wage rate.
    •  Search unemployment: when workers do not accept the first job or jobs on offer but spend some time looking for a better job
    • Casual unemployment: workers who are out of work between periods of employment including actors, construction workers, freelancers
    • Seasonal unemployment: demand for workers fluctuates according to the time of the year, e.g. higher demand for life guard in the summer
  • Structural Unemployment: unemployment arising because of the changing structure of economy
    • Technological unemployment: arises from the introduction of labour-saving technology
    • Regional unemployment: declining industries are concentrated in a particular area of the country
    • International unemployment: workers lose their jobs because demand switches from domestic industries to more competitive foreign industries
  • Cyclical Unemployment / demand-deficient unemployment
    • results from a lack of aggregate demand - the equilibrium level of output is below the full-employment level
    • Aggregate demand for labours decreases to ADL1
    • If workers resist wage cuts, the high wage results in over-supply of labour relative to the demand, which increases the unemployment
    • Even if wage rates fall, because some workers lost jobs and the household income drops, the AD for goods and services decreases, which causes firms to make more worker redundant

  • Financial difficulties: Unemployment often leads to a loss of income, making it difficult for individuals to pay for basic needs such as housing, food, and medical expenses.

     

  • Mental health problems: Unemployment can cause stress, depression, and anxiety, as individuals struggle to find work and support themselves and their families.

     

  • Increased poverty: Unemployment can lead to poverty, particularly for those who have limited savings or support systems. This can further exacerbate financial difficulties and create a cycle of poverty.

     

  • Decreased consumer spending: As individuals have less money to spend, consumer spending decreases, which can negatively impact the overall economy.

     

  • Decreased tax revenue: As fewer individuals are employed, the government collects less tax revenue, which can lead to budget cuts and decreased funding for public services such as education, healthcare, and infrastructure.

     

  • Skills deterioration: When individuals are unemployed for extended periods, their skills can deteriorate, making it even more difficult for them to find work in the future.

     

  • Increased crime: Unemployment can lead to an increase in crime, as individuals turn to illegal activities to support themselves and their families.
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