A2 Economics – Students’ Syllabus (2008 Edexcel)
Unit 3:
Objectives
Business Economics & Efficiency
Cost & Revenue & Profit
Maximisation
Economies of Scale & Efficiency
Birth & Growth of Firms
Barriers to Entry & Contestability
Pricing & Output Decisions:
Perfect Competition
Pricing & Output Decisions:
Monopoly
Pricing & Output Decisions:
Monopsony
Pricing & Output Decisions:
Oligopoly

calculate & draw all cost curves (TC, TFC, TVC, TAC, AFC, AVC, MC)

calculate & draw all revenue curves (TR, AR, MR)

understand the relationship between MR & MC

distinguish between normal & supernormal profit

understand the basic benefits of large scale production

identify a variety of types of economies of scale (must distinguish between
internal & external)

identify & explain diseconomies of scale

define ‘productive efficiency’ and ‘allocative efficiency’

understand the meaning of inefficiency

describe how firms begin and the constraints on their development

analyse the reasons why some firms seek expansion and may derive monopoly
power whilst other remain small

distinguish between different methods of growth (internal, external – vertical,
horizontal, conglomerate mergers)

understand the reasons for demergers

identify various barriers to entry & explain how they act as a barrier (eg.
economies of scale, limit pricing, legal barriers, sunk costs)

contestability theory: understand what determines the contestability of a
market

assess how the threat of new market entrants may influence the behaviour of
existing firms in different market structures

describe conditions of perfect competition & be able to explain the behaviour
of firms based on these conditions

represent market conditions diagrammatically, in the short & long run

understand the significance of firms being price-takers; the meaning of ‘shutdown point’ and the impact of entry / exit from the industry

assess and compare market structures with respect to consumer surplus,
producer surplus, allocative efficiency, productive efficiency

describe conditions of monopoly & be able to explain the behaviour of firms
based on these conditions

represent market conditions diagrammatically, in the short & long run

explain the sources of monopoly power

explain & evaluate potential costs & benefits of monopoly to both firms and
consumers

analyse conditions necessary for price discrimination to occur

assess and compare market structures with respect to consumer surplus,
producer surplus, allocative efficiency, productive efficiency

describe conditions of monopsony & be able to explain the behaviour of firms
based on these conditions

diagrams are NOT required for monopsony

explain & evaluate potential costs & benefits of monopsony to both firms and
consumers in particular markets

describe conditions of oligopoly & be able to explain the behaviour of firms
based on these conditions

the kinked demand curve may be used here as a basis for discussion of
interdependent behaviour, but diagrammatical representation of oligopoly is
NOT required

explain the significance of concentration ratios and interdependent behaviour

understand the reasons for cartels, non-price competition, price wars,
predatory pricing and price leadership

understand basic Game Theory via the prisoners’ dilemma and a simple two
firm / two outcome model (should be able to analyse the advantages /
disadvantages of being a first mover)

evaluate reasons by firms may wish to pursue both tacit and overt collusion

describe conditions of monopolistic competition & be able to explain the
behaviour of firms based on these conditions

represent market conditions diagrammatically, in the short & long run

understand the importance of advertising & differentiation

assess and compare market structures with respect to consumer surplus,
producer surplus, allocative efficiency, productive efficiency
Alternative Motives for Firms

distinguish between different corporate objectives and exemplify these
diagrammatically (profit maximisation, revenue maximisation, sales
maximisation, satisficing)
Competition Policy in the UK &
EU

understand the nature of basic UK and EU based policy

analyse the effects of such measures for both producers and consumers
(*detailed knowledge of legislation is NOT req’d)
Regulation of Privatised
Industries

analyse how the creation of regulatory agencies (eg. Oftel, Ofwat) aim to
influence the behaviour of suppliers in previously state owned industries

compare and evaluate the strengths and weaknesses for both firms and
consumers of methods of regulation (eg. price capping & performance targets)

explain various types of private sector involvement in public sector
organisations (eg. contracting out, competitive tendering, public/private
partnerships – PPP/PFI)
Pricing & Output Decisions:
Monopolistic Competition
Unit 4:
Objectives
The Global Economy
Fiscal, Monetary, & Supply Side
Policies
(review unit 2)
Causes of Globalisation
Trade Liberalisation &
Protectionism

evaluate policy instruments in achieving policy objectives and associated
problems that be hinder their effectiveness (eg. time lags, accuracy of data,
etc.)

understand global factors influencing a country’s inflation rate (eg. low wages
from developing countries, rising commodity prices, etc)

use the AD / AS model to analyse & evaluate these policies – LRAS & SRAS
should both be considered

evaluate the factors that have influenced the interdependence of economies
(eg. reduced trade barriers, growth of MNC’s, technology – internet, etc.)

assess the costs & benefits of globalisation (including sustainability &
degradation)

understand the benefits & costs of specialisation & trade – the law of
comparative advantage

identify the patterns of trade between developed & developing countries (eg.
impact of China & India and reactions of developed economies)

explain efforts to reduce trade barriers including how WTO membership
constrains use of protectionist policies

identify potential restrictions on free trade: reasons & types (eg. tariffs,
quotas, non-tariff barriers, subsidies, CAP)
Exchange Rate Systems
The Balance of Payments
European Monetary Union
Public Expenditure & Taxation
International Competitiveness
Poverty & Inequality
Constraints on Growth

evaluate potential effects of protectionist policies on resource allocation
(should examine cases of protectionism currently in the news)

evaluate possible sources of conflict between WTO objectives and trading bloc
objectives

explain how exch. rates are determined under floating exch. rates (unit 1)

understand influences on exch. rates (eg. relative interest & inflation rates,
speculative capital flows)

evaluate the effects of changes in exch. rates on levels of economic activity in
different countries

understand main elements of current acc’t & brief knowledge of capital flows
in the financial acc’t

understand the factors influencing the size of deficits & surpluses on different
components of BofP, with specific attention to the significance of deficits &
surpluses on the current account – for the country in question and other
countries

use knowledge of recent trends in UK acc’ts to discuss related topics

evaluate the impact of policy measures designed to alleviate B of P
disequilibrium (eg. exch. rate adjustment, demand mgm’t, supply side policies)

evaluate the implications of monetary union for the conduct of monetary
policy and fiscal policy of individual countries

evaluate the pros and cons of EU membership of both existing members and
hopeful future members

explain reasons for the changing size & composition of UK public expenditure,
public sector borrowing, and gov’t revenue

explain and evaluate differences between countries in their public finances
(esp. developed vs. developing countries)

understand various types of taxation (eg. direct vs. indirect; progressive,
proportional, regressive)

understand the link between changes in tax rates & tax revenues (including
elasticity, collectability & tax evasion)

examine the relationship between taxes and human capital

understand how gov’ts might use taxation & public expenditure to reduce
poverty

understand the significance of the size of public sector borrowing & debt –
compare impact between countries wrt MNCs & confidence

understand various measures of the competitive position of the leading
countries in int’l trade (eg. relative unit labour costs & relative export prices)

appraise the competitiveness of British industry in both home and overseas
markets (eg. exchange rate, productivity, wage / non-wage costs, regulation)

explain the UK’s export performance and import penetration

evaluate gov’t measures to enhance UK competitiveness (eg. deregulation,
encouraging investment, enhancement of labour skills, etc.)

differentiate between absolute & relative poverty

compare and contrast GDP/capita, and other measures of social development
(life exp, literacy rates, agricultural emp.)

identify and understand / sketch a Lorenz curve & Gini coefficients

consider the causes & consequences of inequality & poverty in developed &
developing countries

examine to what extent inequality is a necessary ingredient of capitalism

understand how the following act as a constraint on growth & development:
- poor infrastructure
- human capital inadequacies
- primary product dependency (esp. with declining terms of trade)
- savings gap – inadequate capital accumulation
- foreign currency gap
- capital flight
- corruption
- population issues
- debt
- poor governance; civil wars
Promoting Growth &
Development

Consider the benefits & costs associated with each of the following strategies:
- aid
- debt relief
- development of human capital
- inward / outward looking strategies
- free market / government intervention strategies
- industrialisation; development of tourism; agriculture
- microfinance
- fair trade schemes
- role of international financial institutions & non-government organisations

Evaluate strategies in the context of theoretical frameworks (eg. market
oriented approaches, structural change theories, international dependence
theories)