Unit F581 Micro Economics Revision Guide
The reasons for individuals, organisations and societies having to make choices
Define the economic problem
Apply the economic problem to an economic agent i.e. family going to Alton Towers
Define the 4 factors of production
Apply the 4 factors of production to a given business or industry i.e. aviation
Define specialisation
Explain how specialisation helps overcome the economic problem
Define opportunity cost
Illustrate the concept of opportunity cost through a production possibility curve with
numerical examples
Define what a production possibility curve shows
Explain how a production possibility curve shows:
>scarcity
> choice
> O.C
Explain why a production possibility curve shifts and what this means
Competitive markets and how they work
Define what is meant by a market
Define demand
Explain why demand curves slope down
Explain what causes demand curves to shift (PASIFIC)
Define consumer surplus
Illustrate consumer surplus using a diagram and a change in price
Define supply
Explain why supply curves slope up
Explain what causes supply curves to shift (particular focus on tax/changes in the costs of
the FOP)
Define producer surplus
Illustrate producer surplus using a diagram and a change in price
Define what is meant by a market
Draw a diagram that illustrates a market
Explain how a market allocates scarce resources through the 4 stages(shift, change price,
change in quantity, new equilibrium)
Define equilibrium
Define surplus
Define shortage
Define PED/XED/YED/PES (words and formula)
Make simple calculations for Define PED/XED/YED/PES and explain what the answers means
Explain the business relevance of different elasticity estimates using diagrams
T.W.E the relevance of different elasticity estimates
Define allocative efficiency
Explain the conditions under which allocative efficiency is achieved
Discuss whether competitive markets always lead to allocative efficiency
Market failure and government intervention
Define PC / PB
Define EC / EB
Define MSC / MSB
Define negative/positive externalities
Define information failure
Define demerit/merit good/service
Define market failure
Draw a diagram that illustrates MF
Explain how negative/positive externalities lead to market failure
Explain the characteristics of public goods
Explain why the existence of public goods leads to market failure
Evaluate the impact of indirect taxes as a possible solution to market failure
Evaluate the impact of subsidies as a possible solution to market failure
Evaluate the impact of regulation as a possible solution to market failure (provision, max/min
pricing, laws)
Evaluate the impact of tradeable pollution permits as a possible solution to market failure
Evaluate the impact of the provision of information as a possible solution to market failure
All of the evaluation questions may require you to illustrate all 4 levels:
L1 – Knowledge i.e. definitions
L2 – Application i.e. a diagram and explanation of how it works
L3 – Analysis of the advantages and disadvantages of the method
L4 –Evaluation i.e. judgment and TWE discussed given the case study