SHS
ECONOMICS
HANDBOOK
Welcome to Economics!
Well done for taking the plunge into this new subject – you will be glad you
did! You will gain a better awareness of current issues that are affecting
your life and will affect your life increasingly in the future. Whether or not
you continue in the subject at university, you will gain valuable insight into
the workings of the global economy and political economic debate.
You will be following the Edexcel syllabus, which is broken down into four
units; two at AS and two at A2. In the first three units, you will discover all
the main theories and concepts used by Economists to explain the behaviour
of people as they attempt to maximise their benefit from limited resources.
The last unit will re-visit these concepts as they apply to particular markets
– developing countries and the UK within the European Union.
Economics is a social science and you will learn that there are very few
things in the subject that are absolutely certain. Most concepts and
theories can be challenged and you will be encouraged to do just that. We
will have lively discussions about how these concepts apply to current
economic situations that we can observe all around us, and we will assess the
possibilities for making those situations work even better for those
affected.
What to expect from Economics…
Because you are initially learning a new subject with new vocabulary and theories,
you will need to do a lot of memory work very early on, to ensure that you can use
this new information fluently when we become more analytical. We will, however,
quickly get on to more analysis and critical thinking where you will be required to
think beyond the basic theories and to explore their application to real
circumstances presented in case studies. You should not expect to have each
economic scenario spelled out for you… you will have to do your own thinking,
often learning new material on your own.
You must always…
1. Arrive at lessons on time. Time is short and we must make the most of our
limited lesson time so we do not have to rush through important topics
towards the end of the year.
2. Prepare assigned work by the date set by the teacher. This may be used as
the basis for the next lesson and you will not be able to take advantage of
that lesson if you have not done the necessary preparation.
3. Complete assessed homework on time – very important if you are to get the
quality feedback that will enable your success. (If you leave too long
between the lesson and the homework, you will find it much more difficult
to complete.)
4. Keep your notes organised. You will revise mostly from notes taken during
lessons and assigned work. If this is not well organised you will be lost when
it comes to preparing for examinations. (Many students find it useful to
copy out notes after each lesson… this may seem like a waste of time, but it
will actually cement the knowledge into your brain, and is a good habit to
develop; it will give your ongoing efforts a focus.)
5. Ask questions immediately if you are unsure of what is being discussed in
lessons. Don’t wait, hoping for it to make sense later. Information is
organised so it builds on previous material so you need to address problem
areas as soon as possible.
6. Find out what has been done in lessons you have missed (though there won’t
be many!) It is your responsibility to write up any notes and, more
importantly, to make sure you understand what was learned during that
lesson. Ask your peers to explain it to you, read about it in the textbook or
on the intranet and, if you are still uncertain, ask the teacher. You must not
fall behind – we will move quickly.
7. Keep up with current Economic affairs discussed in the media. These will
include different political views on how government money should be
collected or spent, changes in interest rates, booming or declining
industries, trade issues with other countries, and any other events which
are likely to impact any aspect of our economy.
“Government’s view of the economy could be summed up in a few short phrases: If
it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise
it.” – Ronald Regan
“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to
get for five dollars when you had hair.” – Sam Ewing
AS Economics – Students Syllabus
Unit 1- Markets: How
They Work
Objectives
Key Skills
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The Economic Problem
and Efficiency
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Supply & Demand
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Elasticity
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calculate percentage & percentage change, read & create graphs,
read & interpret an index chart, calculate average
use the ‘point/because/therefore/but’ format to answer evaluative
questions
distinguish positive from normative statements
understand the problem of unlimited wants & finite resources –
opportunity cost & scarcity
be able to discuss the main economic resources (land, labour capital,
enterprise) and the difference between renewable and nonrenewable resources
use the concept of opportunity cost to illustrate production
possibility curves
be able to apply understanding of specialisation and the division of
labour to specific cases
distinguish between factors which cause shifts of or movements
along supply & demand curves (incl. impact of entry & exit of firms
on supply)
analyse changes in equilibrium price & quantity (using graphs to
illustrate) in various markets
define, measure & interpret price elasticity of demand & supply,
income elasticity of demand, and cross elasticity of demand
use these concepts to distinguish between types of goods (eg.
normal/inferior, necessity/luxury, substitutes/complements, etc.)
Market Economies

analyse the adv. & disadv. of free market economies & the existence
of mixed economies
The Price Mechanism and
the Role of Markets

examine how prices respond to changes in consumer preferences
and provide rationing, incentive and signalling functions in providing
scarce resources
apply the price mechanism in markets such as goods, services,
commodities or labour
understand the main players in market transactions, the role of
markets in allocating resources, the interrelationships between
markets
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Applications of Supply &
Demand
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analyse consumer & producer surplus
demonstrate the impact & incidence of taxes and subsidies on
consumers, producers, and gov’t
apply price S/D theory to specific markets (eg. Commodities,
agriculture, housing, exchange rates, etc.)
understand the factors which influence the demand for labour (incl.
recognising that labour is derived from demand for the final product)
understand the factors which influence the supply of labour (inc.
population, migration, income tax, benefits, min. wage, gov’t regs &
trade unions)
Markets: Why They Fail
Objectives
Market Failure

define & understand how the price mechanisms may not allocate
resources efficiently
Imperfect Market
Information

distinguish between symmetric and asymmetric information
understand how imperfect market information may lead to
misallocation of resources (eg. health care, education, pensions,
tobacco & alcohol)
assess the options for government intervention
explain why public goods may not be provided by the market – must
understand the free-rider problem
explain the role of government provision & regulation
assess the case for and against gov’t provision & regulation
explain the impact of production & consumption on third parties –
both positive and negative using MPC/MPB diagrams (esp. road
congestion, environmental pollution, healthcare, education and major
infrastructure projects – eg sporting events)
explain the various options for government intervention (regulation,
taxation, extension of property rights, tradable permits, subsidies)
assess the case for and against government intervention & private
sector expansion
understand what it means for labour to be immobile – geographical
(incl. house prices) or occupational (incl. skills shortage)
be able to explain why these might lead to structural unemployment
apply and assess gov’t measure to reduce factor immobility such as
training programmes and relocation subsidies
understand the causes and effects of fluctuating commodity prices on
consumers and producers (incl. uncertainty in production, time lags,
significance of price & income elasticity of demand)
assess the impact of intervention in the form min. prices & buffer
stocks using diagrammatic analysis
cobweb theory NOT required
understand how government action may reduce efficiency by
inappropriate responses or lead to unintended results
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Public Goods
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Externalities
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Labour Immobility
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Unstable Commodity
Markets
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Government Failure
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Unit 2: Managing The
Economy
Objectives
Circular Flow of Income
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
Measure of Economic
Performance: Gross
Domestic Product


draw and explain a diagram of circular flow, including leakages and
injections
understand the likely correlation between income and wealth (flow vs.
stock)
define GDP – distinguishing between nominal and real (detailed
measurement of GDP is NOT required), total and per capita, volume
and value
understand the limitations of GDP as an indicator of comparative living
standards between developed & developing countries and over time
define inflation
understand how the rate of inflation is measured using RPI, RPIX, CPI
discuss the limitations of the index
Measure of Econ.
Performance: Retail Price
Index

Measure of Econ.
Performance: Level of
Unemployment

compare and contrast alternative methods for measuring
unemployment in the economy, assessing their limitations (claimant
count vs. ILO measure)
Measure of Econ.
Performance: Balance of
Payments

apply a working knowledge of exchange rates to changes in trade
patterns
understand the main components of the BofP with special reference
to the current account (goods, services, investment income)
Measures of Development
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Aggregate Demand &
Aggregate Supply
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Fiscal Policy
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understand the advantages and limitations of HDI in making
comparisons of living standards between countries (3 components of
HDI, interpretation of data) – in conjunction with understanding of PPP
(calculations NOT req’d)
interpret and use other measures of development eg. % in agriculture,
school enrolment, access to clean water, energy consumption per
capita, access to mobile phones
understand the meaning of each of the components of AD and the
factors influencing their size (the income/expenditure approach is NOT
required)
understand the multiplier effect using a descriptive approach
understand the relationship between SRAS and LRAS (should be able
to illustrate ‘spare capacity’ on a diagram)
explain the factors influencing AS – esp technology & skills
assess the impact of changes in the economy on equilibrium price level
and output (esp. world oil prices, financial crisis within the global
economy)
define fiscal policy as a demand side tool
analyse specific impacts of fiscal policy on AD
assess the limitations of fiscal policy
understand the main influences on gov’t spending
Monetary Policy
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Supply Side Policies

Macroeconomic
Objectives
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
Economic Growth
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Unemployment
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Price Stability
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Balance of Payments
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define monetary policy as a demand side tool
analyse the impact of changes in interest rates on AD, and potentially
AS
understand the relationship between interest rates and exchange
rates and therefore trade
assess the limitations of monetary policy
discuss the main tools of supply-side policies and their impact on
short & long run AS (esp. education & training, reduction in trade
union power, reduction in unemp. Benefits)
understand the main macroeconomic objectives in an EU context
(econ growth, control of inflation, low unemp, BofP equilibrium,
distribution of income, protection of environment)
evaluate the conflicts between various objectives (eg. inflation &
unemp – basic Philips curve only; econ growth & sustainability)
define economic growth
discuss the causes of differences in growth rates between countries
(incl. investment, innovation, capital markets, instability of gov’t)
understand the causes, costs, & effects of high/ low growth on the
economy in the short and long run
identify trends in growth rates & factors influencing growth rates (eg.
migration, birth rates, export levels)
understand the concept of ‘sustainable growth’
assess the benefits (living standards, profits, tax rev.) and costs (BofP
probs, income distribution, environment) of econ. growth
contrast growth rates between rich and poor nations including
understanding of output gaps in developed countries
suggest policies to correct imbalances
assess the limitations of such policies
understand the causes, costs, and effets of high of low
unemployment on the economy in the short and long run
suggest policies to correct imbalances
assess the limitations of such policies
understand the causes, costs, and effects of high or low inflation on
the economy in the short/long run
suggest policies to correct imbalances
assess the limitations of such policies
understand the causes, costs, and effects of deficit or surplus on the
current account on the economy in the short and long run
suggest trade protection policies
assess the limitations of such policies (including PED of exports /
imports which may distort effect of currency changes or other policy
success)
Economics Reading List
Textbooks:
1. Microeconomics for AS Level & Macroeconomics for AS Level – A.Threadgould; Anforme Publishing
(students will be given a copy of each)
2. Economics for Edexcel; 5th Edition – A. Anderton (used in classroom discussion
Magazines:
1. Economic Review – Philip Allan Updates
2. The Economist – not quite as heavy going as it looks; give it a try!
3. Quality Daily Newspapers – keep up to date on current economic affairs
Websites:
1. tutor2u.net – online questions with answers, revision notes on each part of the syllabus – subscribe to
the blog to stay in touch with Economics on a daily basis
2. bized.ac.uk – many revision materials and activities
3. bankofengland.co.uk – regular reports on the state of the economy
4. Ted.com – engaging talks from impressive people – many relating to Economics but all fabulously
interesting and well presented
Lighter Reading:
1. The Undercover Economist – T. Harford (economic issues in plain entertaining English)
2. Freakonomics – S. Levitt & S. Dubner (a fresh and quirky outlook on economics)
3. Naked Economics: Undressing the Dismal Science – B. Malkiel & C. Wheelan (economic issues in plain
English – particularly relevant to Units 2 & 5)
4. Economics: The User’s Guide – HJ Chang (an easily accessible overview of the main aspects of the
subject)
5. The Logic of Life – T. Harford: Uncovering the New Economics of Everything (the sequel to The
Undercover Economist – a very entertaining writer)
6. Economics: A Very Short Introduction (a quick overview of the history and main concepts of the
subject)
7. Free Lunch: Easily digestible Economics – David Smith (a quick overview of AS topics)
Slightly Heavier Going … but still accessible and very well written:
1. Happiness: Lessons From a New Science – R. Leyard (an analysis of whether the current drive toward
greater wealth is in fact making us happier people)
2. Thinking Fast and Slow – D. Kahneman (a look into how do our minds work and how we make
decisions)
3. The Big Questions – SE Landsburg (tackling the problems of Philosophy with ideas from Mathematics,
Economics & Physics)
4. The Big Short – M. Lewis (story of how those who saw it coming actually benefited from the financial
crisis in 2008)
5. Boomerang – M. Lewis (country by country assessment of the Eurozone crisis and how it all came to be)
6. Too Big to Fail – Andrew Sorkin (an analysis of how Wall Street fought to save the financial system and
themselves)
7. The Age of Turbulance: Adventure in a New World – A. Greenspan (an autobiography of one of the
most influential economists of the last 20 years)
8. Milton Friedman: A Biography – A. Ebenstein (a look into the personal circumstances leading to this
great economist’s theories)
9. John Maynard Keynes: Economist, Philosopher, Statesman (a sympathetic account of the life and
influences of a passionate visionary whose ideas remain even today at the centre of political and
economic discussion)
10. The Affluent Society – J.K. Galbraith (the economics of abundance - challenges why we worship work
and productivity when so much of what we produce is superfluous)
11. The White Man’s Burden: Why the West’s Efforts to Aid the Rest have Done So Much Ill and So Little
Good – W. Easterly (a critique of aid from the richest to the poorest countries)
12. Development as Freedom – A. Sen (an examination of why this era of enormous opulence and
prosperity sees so many still living without freedom)
13. The Bottom Billion: Why the poorest countries are failing – P Collier
14. Common Wealth: Economics for a Crowded Planet – J. Sachs (an analysis of sustainability for the 21st
century)
15. Poor Story: An Insider Uncovers How Globalisation and Good Intentions Have Failed the World’s Poor –
G. Bolton
16. Globalisation and its Discontents – J. Stiglitz (discussion of the IMF’s role in perpetuating difficulty for
the developing world)
17. Thinking Stategically – Dixit & Nalebuff (the application of Game Theory to getting ahead in life)
18. Predictably Irrational: Hidden forces that shape our decisions – D Ariely (an introduction to behavioural
Economics)
Revision:
1. Student Unit Guides: All Units – Philip Allan Updates (can’t recommend these enough)
2. Online multiple choice questions – Tutor2u
3. Essential Word Dictionary – Philip Allan Updates ( more than just a dictionary)
4. Past papers – there is no substitute – see the exam board website
“The economy depends about as much on economists
as the weather does on weather forecasters.” - unknown
Holiday Work
You need to start thinking like an Economist. Although you haven’t learned any
theory yet, you can start to become aware of the Economics that is occurring all
around you. During the summer, you may choose between the two tasks below.
1. Read either Naked Economics or The Undercover Economist, and prepare a
short presentation (5 mins) for the class, explaining what you felt was the
most interesting aspect of the book, and what you feel you’ve learned from
reading it.
OR
2. Collect a variety of newspaper clippings (8 - 10) that you think relate to
Economics. For each one, make some bullet points to summarise it. Why is
each story important or newsworthy? You will be presenting these to the
class, using your summaries as the basis of your presentation. (Some of the
issues that would be relevant would include firms merging or breaking apart,
governments talking about trade or the environment, taxes, unemployment,
immigration, UK competitiveness internationally, Bank of England interest
rate decisions, etc.)
This task must be completed by the first Economics lesson of the Autumn term.
“Economics is extremely useful as a form of employment for economists”
– John Kenneth Galbraith