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AS/A Level Economics 9708
Unit 2: The price system in detail
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Recommended Prior Knowledge
The operation of demand and supply through the market mechanism.
Context
The Unit concludes the micro economic section of the course and introduces the notion of government intervention to improve the allocation of resources. This will be
used in dealing with both national and international macro economic problems.
Outline
After examining the concept of elasticity and demonstrating how price allocates resources, some failures of the price system are explained. Government analysis of and
policy on the failures lead on to a consideration of alternative economic systems.
AO
Learning outcomes
Suggested Teaching activities
Learning resources
2e
Candidates should
•
define and calculate price,
income and cross elasticities of
demand
•
explain the meaning and causes
of various elasticity values
•
establish the link between
elasticity, price and revenue
•
distinguish between normal and
inferior goods
•
appreciate the uses of demand
elasticity for government and
business
Contrast demand behaviour for ‘necessities’ and ‘luxuries’
•
analyse the significance of demand curves with
different slopes and the limiting case curves
•
apply the elasticity formula to numerical data
•
examine and explain actual values for price and
income and cross elasticities
•
construct revenue effect grid from elasticity values
and price changes
•
analyse with diagrams the burden of taxation in
different elasticity positions
•
examine link between elasticity and advertising
•
elasticity simulations (virtual learning arcade)
Anderton Units 8, 9, 10 and 11
Bamford Chap 2
Gillespie Pages 7, 8 and 9
Stanlake Chap 9
Candidates should
•
define and calculate price
elasticity of supply
•
explain the meaning and causes
Apply the elasticity formula to numerical data
Anderton Unit 9
Bamford Chap 2
Gillespie Page 11
Stanlake Chap 10
2h
•
interpret the significance of the slope of the supply
curve
Bized Learning materials Economics Topic 2,
Markets; virtual learning arcade
S-cool Price Elasticity of Demand
S-cool Income Elasticity of Demand
S-cool Cross Price Elasticity of Demand
Tutor2u Price Elasticity of Demand
Tutor2u Income Elasticity of Demand
Tutor2u Cross Price Elasticity of Demand
AO
Learning outcomes
•
2k
of various elasticity values
apply elasticity of supply to
different production techniques
Candidates should explain the
functions of price as a signal in the use
of resources
Suggested Teaching activities
•
•
•
analyse responsiveness of supply in different
industries
analyse reactions of consumers and producers to
given price change and effect on allocation
construct flow chart of process
Learning resources
S-cool Price Elasticity of Supply
Tutor2u Price Elasticity of Supply
Anderton Unit 15
Bamford Chap 2
Gillespie Page 12
Stanlake Chap 11
Oheschools Unit 2 The free market approach
Candidates should
•
understand the effect of
consumption and production
decisions on third parties
provide examples of negative and
•
positive externalities
•
illustrate the impact of
externalities on market outcomes
analyse the elements of decisions e.g. private transport ,
night air flights etc
research local and national cases e.g. environmental impacts
graph external as well as private costs and benefits to
highlight market outcome
tackling traffic congestion simulation (virtual learning arcade)
cotton fields activity
Anderton Unit 19
Bamford Chap 3
Gillespie Pages 23, 24 and 25
Stanlake Chaps 20 and 21
3b
Candidates should distinguish
between private, external and social
costs/benefits and show how they are
related
analyse situations to make distinctions e.g. waste disposal,
modern agriculture methods
Anderton Unit 19
Bamford Chap 3
Gillespie Page 24
Stanlake Chap 20
3c
Candidates should
•
understand the features of CBA
•
appreciate CBA as a method of
evaluating the impact of
economic actions and arriving at
a policy decision
be aware of the basics of the
•
CBA method
contrast basis of private and public decision making
analyse a hypothetical case e.g. ban on smoking
study of actual case e.g. dam construction, transport
infrastructure spending
tackling traffic congestion simulation (virtual learning arcade)
Anderton Unit 22
Bamford Chap 3
Gillespie Page 61
Stanlake Chap 20
3a
Bized Learning materials Economics Topic 5,
Market failure; virtual developing country aid field
trip, wildlife field trip; virtual learning arcade
Jusbiz The real price of cotton
Oheschools Unit 3 The case against the free
market
S-cool Externalities
Tutor2u What are Externalities?
Tutor2u Positive Externalities
Bized Virtual developing country aid field trip;
virtual learning arcade
Tutor2u Cost Benefit Analysis
AO
Learning outcomes
•
3d
Suggested Teaching activities
Learning resources
Analyse pattern of government expenditure.
Anderton Unit 20
Bamford Chap 3
Gillespie Pages 23 and 25
Stanlake Chap 21
apply CBA to relevant cases
Candidates should
•
understand the nature of public
and merit /demerit goods
•
identify examples of public and
merit/demerit goods
Debate practicality and desirability of private provision of
public and merit goods
S-cool Public, Merit and Demerit Goods
Tutor2u Public Goods
Tutor2u Merit Goods and Service
3e
1b
Candidates should
•
describe the different methods of
government intervention in
markets
link the methods to market failure
•
•
show how different methods
achieve their objective
•
recognise the problems and limits
of the methods
Use demand and supply analysis to show impact of
government action
Anderton Unit 21
Bamford Chap 3
Gillespie Page 26
Stanlake Chaps 24 and 25
View outcomes from different perspectives eg business,
government, consumer to identify side effects of policy
Bized Learning materials Economics Topics 2,
Markets and 5, Market failure; virtual developing
country rural life field trip
S-cool What is Market Failure?
S-cool What can be done about these
Externalities?
Tutor2u Introduction to Market Failure
Tutor2u Direct Regulation of Externalities
Tutor2u Correcting Positive Externalities
Candidates should
•
understand the features of the
three economic systems
•
distinguish between the operation
of the three types
•
recognise the strengths and
weaknesses of the different
systems
analyse the success of the
•
western social market model
Contrast economic organisation of sample economies
Anderton Units 41, 42, 43, and 44
Bamford Chap 1
Gillespie Pages 2 and 3
Stanlake Chaps 3 and 4
Compare economic indicators for western and eastern
European economies in 1970s
Student case studies of different economies with report back
Oheschools Unit 2 The free market approach
S-cool Free Market v Command Economies
Tutor2u Economic Systems
World Bank country profiles and news