NATIONAL QUALIFICATIONS CURRICULUM SUPPORT
Economics
Microeconomics,
The UK Economy and
The International Economy
[INTERMEDIATE 2;
HIGHER]
Martin Duguid
The Scottish Qualifications Authority regularly reviews
the arrangements for National Qualifications. Users of
all NQ support materials, whether published by LT
Scotland or others, are reminded that it is their
responsibility to check that the support materials
correspond to the requirements of the current
arrangements.
Acknowledgement
Learning and Teaching Scotland gratefully acknowledge this contribution to the National
Qualifications support programme for Economics.
© Learning and Teaching Scotland 2005
This resource may be reproduced in whole or in part for educational purposes by educational
establishments in Scotland provided that no profit accrues at any stage.
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Contents
Introduction: Student Induction Pack
Unit 1: Microeconomics
Topic 1: The basic economic problem
Topic 2: Demand
Topic 3: Supply
Topic 4: The operation of markets
Topic 5: Types of market (for Higher only)
Unit 2: The UK Economy
Topic 1: National income
Topic 2: Inflation and unemployment
Topic 3: The role of government in the economy
Topic 4: Government economic policies (for Higher only)
Unit 3: The International Economy
Topic 1: International trade and payments
Topic 2: The international economic environment
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STUDENT INDUCTION PACK
Introduction
Introduction
The aim of this pack is to provide information which will help you du ring
your Economics course at Intermediate 2 or Higher level.
Rationale
All societies, organisations and individuals face the economic problem of
allocating scarce resources among competing uses. Economics is the social
science which provides the knowledge and skills required to make decisions
about the production and consumption of goods and services. This course is
concerned with the ways in which such decisions are made and the
implications which these decisions have for individuals, organisations and
society. The course will help you to build up knowledge of economic
principles. You will develop skills in interpreting and analysing economic
information as well as evaluating the costs and benefits of decisions.
This economics course looks at both the world of business and the economic
environment in which business is set. It will benefit anyone thinking of a
career in central or local government, commerce, finance or industry.
Course aims
The course aims to develop:
• a knowledge and understanding of the basic economic problem of
allocating scarce resources among alternative uses
• an understanding of the economic roles and responsibilities of the
individual as a consumer, employee, producer and citizen
• an understanding of the economic roles and res ponsibilities of firms and
governments in the use of resources
• an understanding of the environmental and social costs involved in
economic decisions
• an understanding of the economic relationships between countries
• an ability to explain and analyse economic problems and to suggest
possible solutions
• an ability to communicate economic ideas in a logical and effective manner.
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Course details
The course is made up of three units:
• Microeconomics
• The UK Economy
• The International Economy
Each unit is divided into topics. It will help you to organise your notes if you
have a ring binder for each unit with a separate section for each topic. The
topics are:
Unit 1: Microeconomics
1.
2.
3.
4.
5.
The Basic Economic Problem
Demand
Supply
The Operation of Markets
Types of Market
Unit 2: The UK Economy
1.
2.
3.
4.
National Income
Inflation and Unemployment
The Role of Government in the Economy
Government Economic Policies
Unit 3: The International Economy
1.
2.
International Trade and Payments
The International Economic Environment
Methods of teaching and learning
Different methods of teaching and learning will be used during your course
but emphasis will be placed on examining, explaining and analysing current
economic events and issues in the UK, European and world economies. You
will be using articles from newspapers, magazines and journals and
programmes recorded from TV or radio. The Internet is a very valuable
source of material. You may also use computer simulations of the economy
and economic statistics drawn from a variety of sources. It is important that
you keep up with economic events and you should regularly listen to or watch
news bulletins. You will also find it useful to scan radio/TV listings to look
for and record relevant
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programmes. Reading a newspaper and compiling a file of articles will also
be of great benefit to you.
Homework
Your teacher will give you homework. This may consist of written exercises,
completing work started in class or researching information. Study is als o
important and you should spend time as soon as possible after each lesson
reading and learning your notes and textbook. It is important that you identify
any problems of understanding as soon as possible and ask your teacher for
help. Do not let problems drift – they will not go away by themselves.
Keeping up with events (as outlined above in Methods of Teaching and
Learning) should also be considered as part of your homework. It follows that
planning, setting deadlines and sticking to them is vital for h omework and
study. This will contribute greatly to your success.
Absence
If you know in advance that you are going to be absent, inform your teacher
and ask for any work which will be covered in your absence.
In the case of sickness or other unavoidable absence, ensure that you obtain a
copy of all notes, homework, etc. before the next class. It is your
responsibility to catch up on the work that you have missed.
Because part of your assessment is continuous, it is important that your
attendance is good. Poor attendance, together with a failure to cover any work
which has been missed, will inevitably result in lack of success.
Assessment
You will be assessed on your performance in two main ways – internal
assessment and external assessment.
Internal assessment
There are three internal assessments, one for each unit. Each assessment will
be one hour long.
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External assessment
At the end of the course you will sit an examination. This assessment will be
set and marked by the Scottish Qualifications Authority. If you pass you will
awarded a grade A–C.
You must pass all the internal assessments and the final examination to pass
the course.
Intermediate 2
The examination will be a written paper and you will be allowed 1 hour 45
minutes.
Part 1
Part 2
Two data response items.
One question from a choice of five.
40 marks
20 marks
Each question will be normally divided up into
three sections. You will have to write extended
answers.
TOTAL
60 marks
Higher
The examination will be a written paper and you will be allowed 2 hours 30
minutes.
Part 1
Part 2
Two data response items.
Two questions from a choice of six.
50 marks
50 marks
Each question will require you to write extended
answers.
TOTAL
100 marks
Prelim examination
You will also be given an examination in the spring which will be of the same
type as your final examination. The prelim exam is to give you practice and
may be used for an appeal if you fail to reach the grade your school expects.
This exam is not part of your assessment for the course.
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Learning outcomes
The following pages provide you with a checklist for revision purposes. You
should tick each learning outcome when you have revised it in preparation for
(1) an internal assessment, (2) your prelim exam, (3) your final exam . You
will also find it useful to compare your performance in internal assessments
and in your prelim exam with these learning outcomes.
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Final exam
Prelim exam
Unit 1: Microeconomics
Topic 1 – The Basic Economic Problem
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
explain the basic economic problem.
explain the meaning of scarcity.
explain with examples the meaning of opportunity cost
as it is faced by individuals, firms and governments.
describe the choices (what, how, for whom) faced by
different economic systems.
describe three different types of economic system (see
also Topic 3 in Unit2: The Role of Government in the
Economy).
classify resources/factors of production and describe
their characteristics.
explain the meaning of economic efficiency and why
countries seek to achieve it.
explain the meaning of substitution of resources.
explain the meaning of geographical and occupational
mobility of resources.
describe measures to increase the substitution and
mobility of resources.
and in addition for Higher, you should be able to:
explain how substitution of resources and mobility of
resources may contribute to improved economic
efficiency.
explain the term potential output.
draw production possibility curves.
calculate opportunity costs from production possibility
figures or curves.
explain the factors which may shift a production
possibility curve.
explain the term equity.
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define the term effective demand.
distinguish between individual and market demand.
distinguish between total and marginal utilit y.
draw a demand curve and explain its shape in terms of
marginal utility.
define the law of demand in words and in graph form.
describe factors which influence demand and explain
the effects of changes in these factors on demand.
distinguish between movements along and shifts of
demand curves.
outline the economic objectives of consumers in terms
of marginal utility.
and in addition for Higher, you should be able to:
describe price elasticity of demand in words and in
graph form.
calculate price elasticity of demand.
describe the effects of price changes on revenue for
different price elasticities.
explain the factors which may influence price
elasticity of demand.
describe and calculate income elasticity of dema nd.
explain the significance of positive and negative
income elasticity.
outline the significance of price and income
elasticities of demand for firms and governments.
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Final exam
Prelim exam
Unit 1: Microeconomics
Topic 2 – Demand
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 1: Microeconomics
Topic 3 – Supply
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
define the law of supply and draw a supply curve.
explain the factors which influence supply.
describe the effects on supply of changes in these
influencing factors.
distinguish between movements along and shifts of
supply curves.
and in addition for Higher, you should be able to:
explain and calculate elasticity of supply.
analyse the importance of time in influencing
elasticity of supply.
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explain the meanings of specialisation and division of
labour by product and by process.
describe the advantages and disadvantages of
specialisation to employees, employers and consumers.
distinguish between the short and the long run period
of time.
define the law of diminishing marginal and average
returns.
explain why varying a factor of production eventually
leads to diminishing returns.
define fixed and variable costs of production.
calculate total, average costs and marginal costs from
a given set of figures.
draw fully labelled graphs of total, average and
marginal costs as they vary with output in the short
run.
explain the shape of the short run average cost curve
in terms of increasing and diminishing returns.
define optimum output.
explain the shape of the supply curve in terms of the
marginal cost curve.
define economies of scale; internal and external.
describe the different internal economies of scale.
explain diseconomies of scale.
describe the trends and motives towards globalisation
amongst multi-national enterprises.
describe the process and motives for downsizing.
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Final exam
Prelim exam
Unit 1: Microeconomics
Topic 3 – Supply – Cost, Revenue and Profit
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 1: Microeconomics
Topic 3 – Supply – Cost, Revenue and Profit
(contd.)
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
explain the relationship between long run output
(returns to scale) and average cost.
draw a fully labelled graph showing the behaviour of
average cost in the long run.
define optimum size.
define and calculate total, average and marginal
revenue.
define and calculate profit.
describe the role of profit for a firm.
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define what a market is, and give examples.
describe and explain, both in diagrams and in words,
how equilibrium or market-clearing price is arrived at
in a free competitive market.
describe and explain the effects on equilibrium price
and output of changes in demand and supply.
define what is meant by market intervention and
describe the types of such intervention.
explain why intervention in free markets may take
place.
and in addition for Higher, you should be able to:
explain the meaning of ceteris paribus.
show on a diagram the effects of intervention such as
maximum price, minimum price, tax, subsidy.
analyse data, in textual, numerical or graphical form,
of given market situations.
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Final exam
Prelim exam
Unit 1: Microeconomics
Topic 4 – The Operation of Markets
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 1: Microeconomics
Topic 5 – Types of Market
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
distinguish between a perfect and an imperfect market.
describe and analyse the different types of competition
in markets, i.e. competitive, oligopolistic,
monopolistic and monopsonistic in terms of the
number and size of firms in the market.
describe how firms may differentiate their products.
outline the possible barriers to entry to a market and
the effects of such barriers
explain and analyse how prices are determined in
perfect and imperfect markets.
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explain the term national income.
describe the relationship between national output,
income and expenditure.
describe what national income statistics are used for.
identify the problems of measuring national income.
describe the circular flow of income.
explain the meaning of injections and withdrawals and
their effects on output, employment and income.
and in addition for Higher, you should be able to:
distinguish between GDP, GNP and national income.
explain the difference between nominal and real
measurement.
describe the difficulties in using national income
statistics for making comparisons over time, or
between countries.
describe aggregate demand and its components.
describe aggregate supply (including potential/full
employment supply).
explain how equilibrium national income is arrived at,
using an aggregate demand and supply diagram.
explain reasons for change in equilibrium national
income.
describe and explain, using the circular flow of income
diagram, how the multiplier process works.
calculate the multiplier and its effect on national
income.
describe the phases of the business cycle.
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Final exam
Prelim exam
Unit 2: The UK Economy
Topic 1 – National Income
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 2: The UK Economy
Topic 2 – Inflation and Unemployment
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
define inflation.
explain how the rate of inflation is measured in terms
of the Retail Price Index (headline rate) and the
Consumer Price Index (underlying rate).
list and describe the factors which can cause inflation.
explain the difference between measuring prices and
incomes in money terms and in real terms.
explain the effects of inflation on individuals, firms,
government and the economy.
and in addition for Higher, you should be able to:
describe what is meant by money.
explain the quantity theory of money and the role of
money in inflation.
describe and explain the main trends in inflation in
recent years.
For Intermediate 2 and Higher, you should be able
to:
define unemployment in terms of unused resources.
describe how unemployment may be measured using
the claimant count and labour force survey.
list and explain the demand side causes of
unemployment.
list and explain the supply side causes of
unemployment.
explain the effects of unemployment on individuals,
firms, government and the economy.
and in addition for Higher, you should be able to:
explain patterns and trends of unemployment from
given statistics.
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describe the characteristics of different economic
systems namely free market, planned, mixed.
describe the economic objectives of government.
describe the main types of government expenditure in
terms of programme and type, i.e. capital or current.
explain the reasons for government expenditure on
non- marketable goods (public and merit) and transfer
payments.
describe the changes in recent years in government
provision of goods and services.
list the main sources and types of government income.
explain direct, indirect, progressive and regressive
taxes.
describe the change in balance between direct and
indirect taxation in recent years.
explain the Budget and its role.
explain the effects of changes in the Budget on
individuals and the economy.
state the meaning of economic growth.
describe how economic growth is measured.
describe the sources of economic growth.
distinguish between private and external costs and
benefits.
In addition for Higher, you should be able to:
distinguish between macroeconomic and
microeconomic objectives.
list government macroeconomic objectives and
identify the possible conflicts between them.
list government microeconomic objectives.
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Final exam
Prelim exam
Unit 2: The UK Economy
Topic 3 – The Role of Government in the Economy
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 2: The UK Economy
Topic 4 – Government Economic Policies
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
explain fiscal policy and how it may be used to
achieve a government’s macroeconomic objectives.
explain monetary policy and the role played by the
Bank of England in attempting to achieve a
government’s macroeconomic objectives.
explain supply-side policies and their impact on
workers and firms.
explain the meaning of and give examples of market
failure.
explain the reasons for market failure.
describe and explain the policies which a government
may use to address failings of the market mechanism.
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describe and explain the gains from trade in terms of
absolute advantage and comparative advantage.
describe the benefits of international trade to countries
and consumers.
analyse patterns and trends in trade from given
statistics.
outline the main trends in recent years in the pattern
and direction of UK trade.
describe the barriers to free trade.
describe the purpose and structure of the current
account of the balance of payments.
explain what is meant by an exchange rate and how it
is determined.
explain the effects of changes in an exchange rate for
visitors and travellers and on prices of exports and
imports.
describe the progress towards and features of
European Monetary Union.
In addition for Higher, you should be able to:
explain the reasons for governments imposing barriers
to free trade.
explain the effects of trade barriers on consumers,
firms and the economy.
describe the purpose and structure of the capital
account of the balance of payments.
explain the factors which influence the capital
account.
explain the relationship between exchange rates and
interest rates, and capital movements.
distinguish between fixed, floating and managed
exchange-rate systems.
outline the advantages and disadvantages of fixed,
floating and managed exchange rate systems.
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Final exam
Prelim exam
Unit 3: The International Economy
Topic 1 – International Trade and Payments
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
Final exam
Prelim exam
Unit 3: The International Economy
Topic 2 – The International Economic Environment
For Intermediate 2 and Higher, you should be able
to:
Internal
Assessment
STUDENT INDUCTION PACK
describe the main economic features of the European
Union.
describe the main characteristics of developing
countries.
describe the main characteristics of newly
industrialised countries.
In addition for Higher, you should be able to:
list and explain the advantages and disadvantages of
monetary union.
explain the economic problems of developing
countries.
explain the role of developed countries in promoting
development.
describe the work of the World Trade Organisation
and its recent achievements.
explain the role of international trading and monetary
organisations in the world economy.
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